In this episode, Toby Mathis, Esq. sits down with insurance expert Caleb Guilliams to break down the truth behind infinite banking and permanent life insurance — and why so much of what circulates online is misleading. They examine how life insurance is routinely oversold as an investment, using Kyle Busch’s widely publicized $8 million loss as a cautionary tale about what happens when policies are structured for agent commissions rather than client performance. Caleb explains the three distinct types of life insurance strategies — term, estate planning, and high cash value — and why the vast majority of people should start with term coverage before considering permanent products. Toby and Caleb also walk through how policy loans actually work, including interest rates, repayment flexibility, and the buy-borrow-die strategy as it applies to real estate investors. Additional topics include internal rate of return after all costs, the asset protection advantages of cash value, chronic and critical illness riders as an alternative to traditional long-term care policies, and the red flags that signal a policy has been designed to benefit the agent far more than the client. Tune in for expert insight on how to evaluate, structure, and integrate life insurance as part of a broader financial strategy!

Highlights/Topics:

• 00:00 Don’t believe everything you see online
• 01:22 Insurance being sold as an investment
• 02:55 What infinite banking actually is
• 09:00 Where policies go wrong
• 13:20 Commissions and hidden costs
• 18:30 How policy loans really work
• 23:00 The 3 types of life insurance strategies
• 31:00 Why most people need term first
• 38:00 Who life insurance is really for
• 41:00 Biggest red flags to watch for
• 45:30 Final thoughts
• Share this with business owners you know

Resources:

Guest – Caleb Guilliams / BetterWealth

Have a policy you want reviewed? →https://go.betterwealth.com/tm-review
Want to see if life insurance can better your financial situation? →http://betterwealth.com/tm-call
The AND Asset: The Secret Way to Save And Use Your Money at The Same Time: https://www.amazon.com/Asset-Secret-Save-Your-Money/dp/1732724903

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Full Episode Transcript:

[00:00.00] Intro:

[00:11.48] Toby: Hey guys, Toby Mathis and today we have Caleb Guilliams, an expert in insurance. We’re going to be going over infinite banking. We’re going to be going over what it is, what it’s not. Bank on yourself all these different concepts. How it’s being misused. We’re going to dive into all of it. I wanted to say first off. Thank you Caleb for coming on in and being willing to basically be subjected to a bunch of harsh questions.

[00:35.80] Caleb: I Love it, We had you on our channel and you said a line don’t believe everything you see on TikTok and I think that’s going to be my favorite line in this show. A lot of people are saying a lot of things on the internet and they’re using insurance and what we’ll find is a lot of it’s doing a lot of damage. I’m here to ask your toxic questions and very very much excited to dive in.

[00:59.88] Toby: Alright. Let’s dive right off the top. We had Kyle Busch in this huge case that just got settled out. There’s been some misbehavior in this industry for a long time. What is it?

How do we root it out? How are people being taken advantage by some of the life insurance agents that are out there?

[01:19.24] Caleb: Yeah, the first thing I would say is a lot of life insurance is being sold as an investment. That is first a huge problem because the way that it’s being sold is saying, hey Toby

 you want a tax-free rapper to grow your money tax-free income blah blah. They will use words like banking and all. They essentially say like, hey, you know average people put their money in the markets in real estate and all those other things.

[01:44.12] But the real wealthy people put their money in these insurance products because it’s a rich person’s Roth kind of deal. In a lot of cases, they’re over pitching insurance where it shouldn’t be used and then when it comes to the structuring and lack of disclosure. They are designing these products, which we will dive into. There’s a lot of different ways that you can design products.

[02:04.52] But they’re designing it to very much fill their pockets and that the commissions on these things can be outrageous and so with the Kyle Busch scenario was it was massively miss sold, but it was actually there were so many things that the agent did that was just, I couldn’t even believe when I was reading the loss the lawsuit. I was just like you’ve got to be kidding me. They just didn’t even do the things that they were going to say that they’re going to do.

[02:31.80] They oversold and then they had a product that they weren’t even paying attention to and you get this headline where Kyle lost over eight million dollars in an insurance product. It’s given our industry about black eye rightfully because of all the things that happened. If anyone’s selling insurance as an investment, I think that’s first and foremost you should run from that, personally.

[02:54.48] Toby: Let’s go over what infinite banking is and then we can dive into the components and how it’s misused.

[02:59.64] Caleb: If I had to describe infinite banking, especially if you’re thinking about infinite banking with life insurance. What essentially the pitch is, you’re making money, you can put it into a savings account, or you could put it into a life insurance policy. The policy should have some type of cash value component to it. We can talk about, not all cash value components are created equal not all structures are created equal.

[03:24.68] But the premise is you’re putting money into a life insurance policy. It’s growing over time you get other benefits with insurance. Then instead of just withdrawing that money to invest in real estate, your business, going on vacation, paying off debt, any essentially infinite. There’s a  bunch of things that you can do with your money. You’re taking a loan against the life insurance policy.

[03:46.52] That’s where the idea of being your own banker comes in. You’re taking a loan against you could say yourself but it’s actually the insurance company. Then what you’re doing with that money is you’re using it. Then your money is still in your life insurance policy. Theoretically the idea of putting your money into a life insurance policy, leveraging against it or borrowing against that is nothing, there’s nothing wrong. But again, it can be sold, it can very much be oversold from too much money going into it.

[04:15.96] Then a lot of people are thinking about, okay, well, if this is what I’m being told then I can go buy my groceries, I can go on vacations, I can consume, consume, consume and Toby there’s no free money. This is like, you’re putting money into something and you’re going to have to pay that back or you’re going to die. It’s not free money. The abuses are how much money is going in, how the policy is structured, and then how you’re using the capital. If you use one of those things wrong the strategy, unfortunately can do more damage than good

[04:47.44] Toby: I will break this down real quick. We have a life insurance, which means hey if something happens to me. My beneficiary gets money. There’s an extra payment, more than just the life insurance, the cash value that I’m putting money into and it’s going to grow tax-free. As it grows and it’s invested in something, go over that and then I might be able to even get the money early.

[05:12.40] If I need activities of daily living if I have a disability or something long-term care. It’s going against that death benefit the life insurance side. Then when I die all those loans that I took out during my lifetime which I didn’t have to pay tax on get paid back. Where do the wheels come off? Because that seems pretty straightforward to me and I like infinite banking. I like the concept, I have policies, but I know that they’re not all created equal. Where do the wheels come off?

[05:44.08] Caleb: The wheels come off when the policy is not structured in a way that is actually advantageous to you. The way that you mentioned life insurance is a contract and contracts can be good or bad. This better than anybody and so a contract can be designed to be in your favor. But in a lot of cases it can be bad if the required premium puts you in a pinch because life doesn’t work perfectly.

[06:09.44] It can be bad if the policy is not very flexible and doesn’t give you early cash value to be able to use and doesn’t give liquidity. It can be bad if you’re using that money to buy things that ultimately there’s no repayment from either that asset or lifestyle and it’s not a magic bullet. I think of it if you do it properly Toby, I think of life insurance as you know over your lifetime. You’re going to earn anywhere from four to maybe six percent of IRR. We’re not talking home run investing and then and then stop you there real quick

[06:46.24] Toby: Is that after the cost of insurance or is that what you’re thinking? It’s actually going to be the growth.

[06:51.68] Caleb: The internal rate of return is after all cost. We primarily do whole life just because of from a conservative nature. We’re looking at internal rate of return. The IRR is the actual rate of return and that’s there including commissions. It’s after everything, cost of insurance and you’re going to see anywhere from like four to five and a half percent IRR. I think that’s pretty good because I also know the other benefits of insurance you get the living benefits, you get the permanent death benefit, you also get some tax advantages because that money is growing tax-deferred.

[07:26.94] There’s mechanisms to use that money tax-free throughout your life. Overall, that’s what we have but it’s not one of these like get rich quick and in a lot of cases it takes a few years to have more money than what you’ve put in. The big problems that we can get into are people that are getting pushed into this. A lot of times it’s the insurance is not the low-hanging fruit that they should do in the first place. The second thing is there’s no disclosures that are required to show people what you’re making and how things are designed.

[07:59.92] I just see, over because we get policies all the time from people. People are being sold the world, there’d be giving books, like the infinite banking book. I have a book. They will use my book they will use our videos, but those structure policies that are average and it it results in hundreds of thousands of dollars of inefficiency over over their lifetime and it makes it just gives people a bad taste in their mouth

[08:23.32] Toby: Let’s say this, I will say that one of the things that I look at and I look at policies. I’m not an insurance salesman. I don’t know the first thing about how to write the policy. But I do know basic things like if I give somebody $50,000 for a payment and my cash value is $10,000 or my surrender value. That means they charge me $40,000. It seems like an awful lot to be charged and is that real? Is it that simple to look at it and say, hey that surrender value if it’s really low after that for your insurance salesman just took a huge piece.

[09:03.02] Caleb: Yeah, the first year difference between what your cash value is and what you put in. It’s a very healthy assumption to say the lion’s share of that made up some type of the commission. It’s not always there’s always exceptions to the rule but in most cases if you’re putting in $50,000 and your cash value is $10,000 it’s a very healthy assumption to say that the the business the insurance company paid[09:30.18] $40,000 somewhere for that policy to get set up.

[09:34.20] Toby: Ouch, that seems like a little bit extreme.Do you look at that like when somebody comes to you and they say here’s a policy I’m looking at or, hey do you do second opinions on policies like if somebody’s out there and they’re looking like say, hey could you tell me whether this is good bad or whether this is whether there’s red flags here?

[09:51.40] Caleb: Yeah, we do second opinions and we also if people have policies. We can do a free analysis and show them what they currently have and and in a lot of cases over 80% of the time that we look at policies. It’s it’s an unfortunate conversation

[10:07.32] Toby: I used to use a really horrible example, I say if you went into the butcher and said what should I have for dinner every night? Could you make me a menu? 

[10:14.88] Caleb: You’re not going to be eating salad.

[10:16.16] Toby: There’s no salad. There’s no fish. There’s no roughage, you’re going to be clogged right? You’re just going to be having ribeye and fillets and maybe some lamb and some other stuff versus if I went into a nutritionist. I asked the nutritionist design me a menu. It’s going to be something completely different. I say that’s the difference between a fiduciary fiduciary and a non fiduciary somebody who has to put your interest first. When you’re looking at it and somebody’s bringing a policy. What are the red flags that you’re seeing in these policies and what immediately can you save people on by just saying?

[10:50.08] Caleb: Great question. First thing is what outcome or what result are you looking for for the insurance the biggest and I’m telling you take this to the bank. The biggest issue with insurance. We’re going to continue to see this, is if it’s heavily sold on retirement income. Number one, you can’t call it retirement income. That’s not even an official term that you should be using.

[11:11.32] But I’m telling you these things can look amazing on paper and they’re using projections 30-40, 50 years. We talked on the podcast Toby, you’re not a huge fan of leverage. These illustrations that use a bunch of income are utilizing leverage assumptions over 40 years 50 year. Somehow, that’s not a problem or it hasn’t been snuffed out from the regulating arm just of insurance.

[11:39.52] Toby: What do you mean by leveraged assumption real quick?

[11:41.60] Caleb: Leverage assumption in illustrations, when people show you income from a policy coming out or cash flow is the more technical way. There’s some type of income assumption. Usually they’re using either wash loans, some type of loan feature. I’ll remain neutral here. But especially on products like variable universal life or index universal life. In those assumptions, they can assume conservative six percent earning you’re only paying four percent in some cases.

[12:15.24] And so over time, 50, 60 years of an assumption like that it looks amazing. Then the question is how likely is that actually going to happen. It’s not just like you might have less income, we’ve seen paid cases that it’s like you think you’re going to have $100,000 a year and now you’re going a reality that your policy will actually lapse. You will have a tax bill if you don’t put more money into it. Those are the kind of things that life insurance gets a bad rap and rightfully so.

[12:42.36] Going back to your original question. The first question is why did you buy this life insurance and even us who’s, I would call us like life insurance ninjas. We’re not going to be able to fix crazy outcomes from a standpoint if you’re sold a bill of goods, where it is what it is. Insurance is a protection first asset that has other benefits. But it’s not going to solve all your problems, that’s number one. Number two is when we’re actually looking at the policy.

[13:10.00] To simplify this for the audience, there’s what’s called a required premium and then there’s additional premiums. When you think of max funding or some people call it overfunding these are additional premiums that you can put in that usually have way less commission and give you lots of cash value. But one of my favorite things is, they’re flexible.What we see a lot of times and this is more common in whole life than IUL is these policies are sold and I’ll just use a $50,000 example.

[13:37.80] Sometimes the required premium is $50,000, which means that person that agent probably made $50,000 setting up that policy. That means you have almost zero cash value in the first couple of years and you have very little flexibility, that happens. We see that all the time versus if you set up where maybe you have 20% going to the required premium and 80% being made up of the PUA’s or additional premium like optional premium.

[14:11.02] Not only do you have a policy that has $40,000. Let’s just say if cash value of the commission is 10,000 versus 50 but now you have a lot more flexibility. There’s a lot more things that we can do. When we’re talking to people we’re looking at number one, what are their goals? Number two, what’s the mechanism of that policy? Then we’re actually seeing if the policies’ performing. Just seeing how that is and then we’re able to project out and say this is what this looks like. How does this integrate with other assets?

[14:43.32] If someone’s just selling you insurance as the sole asset or the main asset? I got news for you, that’s not going to be good. Life insurance should be integrated whether it’s with the fiduciary or the which or whether it’s with a team. That can understand how a protection asset can blend in with other growth assets, how you make money. If it’s not integrated then by default I would say that you’re probably not going to be best off. I hate to be like the bearer of bad news.

[15:11.48] But if you avoid some of those things that I just mentioned you are so much better off. A lot of times the people that are abusing this, are selling this as the one size fits all. Then to put the cherry on top. They’re not structuring it very efficiently, If they structure it efficiently, there’s at least a lot more options to exit or bring things down, but it’s like the double whammy.

[15:34.72] Toby: Let’s go over a couple things that you just threw a lot out there. I’m always thinking about liquidity. I’m a real estate guy. I love investing and I invest in everything but I always think about real estate is, hey I would love to be able to go buy a house and usually I’m not just sitting. People aren’t just sitting around with a bunch of cash. I want to buy a house. It will be nice if they had a policy that they overfunded for a period of time. They had the ability to get a loan out of that policy.

[16:01.12] How much is that generally going to cost them? Are these lower rate loans? or do they take a piece out of you? Could they borrow that and then put it into real estate and make money off of that investment? If their intent was to possibly pay it back and then if they didn’t pay it back, what’s the ramification?

[16:20.40] Caleb: Great questions. Question number one, rates are anywhere from four and a half to as high as 8%, if there is a percent that’s usually fixed and so whether interest rates go up or down you’re fixed at 8% and then the ones that are usually four or five or six are off of variable.

[16:38.60] That’s important to disclose and a lot of our clients fund money into life insurance. The talking points as it could be a lot safer than your bank over time. Especially if you’re working with solid companies. You don’t have to worry about volatility of your money going up or down. You’re obviously protecting you. There’s a benefit of having a personal protection.

[17:00.56] But then you’re utilizing that cash value borrowing against that to invest in real estate. There’s one of three things that you could do. Number one, is you could pay back that loan. It’s unstructured and meaning there’s no one telling you you have to pay interest or you have to pay it back during a certain time. That’s a good thing and a bad thing. I think the wise thing to do is, if you’re going to deploy capital, figure out a way to pay that back.

[17:26.72] My favorite is when clients have a payback strategy. Way number two is to just service the interest to say, you know what I’m going to pay the interest each year and just have the outstanding debt. Then number three would just see that compounding loan happen. But obviously your money is hopefully in an asset that’s appreciating. What happens when you die the insurance company is going to say, okay Toby, you did an insurance policy with us.

[17:54.56] Let’s say you have $100,000 of cash value and you have a million dollars of death benefit. But you took out a 50,000 loan. What we’re going to do is we’re going to pay your beneficiaries 950,000. That other 50,000 is going to make us whole on the loan that you took from our general account. You mentioned you have a video on the buy borrow die strategy, life insurance enhances you to do that not just with an insurance policy but with other assets because it  creates liquidity for you to have more optionality.

[18:29.82] That money gets paid income tax free, not state tax free, but income tax free. That’s the three ways that you could borrow and the ways that you could pay it back. It will eventually get paid back. That’s why the insurance company doesn’t require you. Because they’re playing a long-term game and they know we have a liability called your death benefit. You’re either going to cancel your policy and then we’re just going to give you the outstanding cash value.

[18:52.74] You’re either going to die and we’re going to pay your death benefit that we’re already going to pay just subtract the outstanding debt or you’re going to pay us back and eat all three ways. We’re going to win and that’s why they can give you competitive loan rates and not require you to have to pay them back.

[19:08.40] Toby: All right. Let’s play with this for a second because I want people to understand this. Some people may have missed this. Let’s say I had a two million dollar death benefit. I have five $500,000 of cash value. And I have a hundred thousand dollar bone and I pass away. How much are my beneficiaries going to get?

[19:31.96] Caleb: 1.5 million dollars, sorry they’re going to get 1.9 million.

[19:43.46] Toby: 1.9. You lose the cash value. Cash value is part of the death benefit, right?

[19:48.24] Caleb: Correct. If you allow me to have share that because I think that is a talking point that some people talk about.  I would love to address that if you can give me a shot.

[19:58.00] Toby: Yeah, absolutely do it right now.

[19:59.44] Caleb: You’re totally right where the talking point that people will say is permanent life insurance, you lose your cash value. Typical life insurance that I just mentioned where all of it’s going to base and all. Maybe that’s true Toby where it’s like the death benefit stays stagnant. But anybody that’s max funding or over funding your death benefit is going to grow a lot more than the money that you’re putting in. While it is true if you think about it from a tax perspective.

[20:32.88] It’s actually very advantageous that the money is getting paid in a death benefit from a tax perspective. In a lot of cases that talking point goes out the window when you look at the increasing death benefit. But you’re totally right the cash value doesn’t come to you in addition to the death benefit. But the death benefit should be at a place where it’s far greater than your initial death benefit plus the cash value together. The death benefit in most cases will be far greater than that equation.

[21:01.12] Toby: The reason I bring that up is because there’s all these things like the making modified endowment contracts all these things. You literally it’s always going to force the death benefit up as that as that cash value grows. Especially for those you guys like there’s some people that have IUL is where you have a run. Maybe you’re able to get, I don’t know what the term is.

[21:21.44] But let’s say you’re making nine or ten percent on a really good year. That’s before they take the cost of the insurance and things like that. But let’s just say that it’s pushing it up and it’s growing it’s in you bought a million dollar death benefit. Your cash value is growing but so is your death benefit. A lot of people think the insurance company just stole my cash value and it’s like, no they paid it in a different way.

[21:45.72] That’s why you need to pay attention to these things. Do you see people buying lower deaths benefit in the beginning trying to put more cash value? You see agents trying to sell more death benefit, under the kind of the pipe dream that hey, we’re going to have this huge amount of a pile of cash. We really need to have that two point five million dollar policy. Do you see anybody doing that?

[22:09.12] Caleb: That’s the classic you said it. There’s really three ways that we could back in our life insurance. Number one is income protection and that’s the question is a lot of term, I’m a big fan of term insurance when set up properly. It’s like what’s the least amount of money? I can pay to temporary protect whether it’s 20 years or 30 years time period. That’s number one and it’s a commodity at this point. If I can get in a company that, well, I can pay less that has strong ratings. I’m going to choose them.

[22:38.56] I’m not going to just pay more because I like your logo. The second way to sell life insurance is state planning. This is where the conversation of cash value is less important. It’s more about we want a permanent death benefit. I want to make sure if I’m 75, 85, 90 that I have a death benefit that gets part of my estate planning for me.

[23:00.16] Toby: Stop right there because, term works to a certain point, but you get to a certain age. It’s not going to work anymore.

[23:07.88] Caleb: Very few term policies pay out. Thank goodness. You don’t want to cash in on your term policy that means you died prematurely. But you get to a place where let’s say 30 years of term insurance for someone who’s 20,25 is very reasonable. Let’s say it’s $700 a year. Then you get to that year 30 and it jumps up to like thirty thousand dollars a year and then every year.

[23:30.40] They make it almost unreasonable for you to stick with them. They know that, hey we’re going to ensure a bunch of people and less than one or two percent of this is going to pay out because people are going to cancel. It’s a pure profit. That doesn’t mean it’s bad but term insurance is very profitable for companies because they’re taking in money. The numbers are on their side from a standpoint of paying out.

[23:57.12] Toby: And they don’t sell it much to the agents that sell term to us.

[24:02.84] Caleb: Normally in term insurance. They’re paying 70% to 100% of the first year. In that example, if I’m paying $700, I don’t make math easy. Let’s say I’m paying a thousand dollars of term. I’m going to make anywhere from $700 to $1000 one time. There’s no renewals. There’s none of that. That’s usually standard when it comes to how commissions work on on term insurance.

[24:23.52] Toby: Now compare that to a whole life or not.

[24:25.52] Caleb: Here’s what’s exciting is maybe your whole life is $10,000 and depending on how it’s structured it could be 10,000 or  Toby it could be as low as we’re writing policies with 10% basis. Which means our clients are getting 85 to 90 plus percent cash value, which do the math. The math is where our commissions are around a thousand, twelve hundred. I don’t want to be the person that says just because your commission’s a little bit higher meaning you’re intentionally screwing someone. You have to understand like why are they writing it that way.

[25:07.60] Going back to what I was saying. There’s term insurance and then if you want to back in life insurance for estate planning. Sometimes believe it or not, the highest commissions come from a state planning. Because the state planning you want a permanent death benefit and a lot of times you’re locking it in. Usually it’s in people that are 50,60, 70s usually they’re locking in a death benefit and the cash value doesn’t matter as much.

[25:32.00] Instead of over funding, which would be actually very inefficient to hit the objective, which is a death benefit. You’re paying mostly in base. But usually you’re paying that from assets and that tends to be the highest commission. But that doesn’t make it a wrong thing that makes it actually the most efficient from a state planning standpoint. The problem is if you’re selling me a bill of goods that this is a cash value accumulation product.

[25:54.84] But then you’re selling me what you sold me. I was told one thing but the reality is different. Then the third policy that I wanted to share is a high cash value policy. In that case we want the death benefit as small as possible. The permanent side, small as possible and it’s going to grow over time, why? Because the difference between permanent death benefit and cash value is in the net amount at risk and usually that’s lower commissions. Anytime I have permanent death coverage and then that’s permanent not like a term rider.

[26:29.48] My commissions are just going to be higher because of how do we back into that. That’s usually the three type of policies. There’s term, there’s a state planning policy, and then there’s high cash value policy. I will just say disclaimer, the problem that I have even with our firm is if we’re selling someone a high cash value policy to do things like real estate or invest. We have to disclose to them you’re buying life insurance you might be putting 50, 60, hundred thousand dollars of cash value in a year into life insurance.

[26:57.56] But don’t think that this is going to cover your human life value. You might be putting in a hundred thousand dollars of cash in a year and your death benefit might be like two million. Where you might or should want maybe a ten million? That’s the dirty side of high cash value is it’s great for your cash. But make sure that you’re also having a conversation with your advisor insurance agent about how much life insurance you should want. Especially early on and so that’s my disclaimer.

[27:26.00] Toby: You might have another term policy on this.

[27:27.68] Caleb: yes, and I’m a huge fan. I myself have multiple permanent policies and I have term policies because personally, I’m not going to put the amount of money I need in permanent life insurance to cover what I want covering myself and my family.

[27:44.44] Toby:  Yeah, it might be cheaper elsewhere for what you’re doing now, which when you’re young you need to have more death benefit than when your kids are grown. Probably the fact of the matter. You may have a term policy and a high cash value policy to get you where you need to go. As opposed to what you oftentimes get sold by the sales guy, or salesperson who says hey, we’re going to get this really great policy and it’s going to have this huge death benefit because boy we really need this death benefit.

[28:16.24] Because if something happened to you your kids would need this. They’re doing it as a permanent and now you’re paying up the nose on that and then you look at their surrender value at the first year. And you’re like my gosh, I just put I’ve seen this 25, $50,000 dollars a year.  Better yet is the people that do premium financing where they’re putting out $500,000. They’re taking a loan out to do it. Well that agent just did pretty well.

[28:41.52] Caleb: It did really well, the secret to life insurance is though all that. You want to get to premium finance if you want to make the big dollars. If you can go convince a client to fund a million dollar life insurance with a loan, it looks great. I think time is not on their side though in a lot of ways that these things are being written. That’s that’s a very interesting space. I will say in most cases having a term policy and a permanent policy.

[29:08.16] Much better than having one trying to do both because normally you get an inefficient

protection vehicle and an inefficient cash accumulation vehicle. Then one step further if you’re going to get term insurance, Spend a few dollars extra and get a convertible term insurance. What that means is you remember when I said that at year 30. Then it jumps up a convertible term insurance allows you any time during your life during that term.

[29:35.48] To convert to a permanent policy at the health rating you got when you got life insurance. It’s one of those things. I’ll just use myself as an example. I got the best rating, thank goodness. I’m knocking on my wooden desk. I got the best rating and that means I’m healthy.  Let’s say over ten years from now I want to convert that into a permanent policy. Number one, I don’t have to redo the health test.

[30:01.04] I just need to sign a piece of paper and convert a chunk of that into a permanent, that’s cool. But let’s say something actually happened to me health wise that limits me from getting life insurance. I now have an option to convert that to more permanent coverage and it just gives me optionality. We’re a big fan of convertible term.

[30:19.70] But convertible term is only as good as the companies that you’re converting to, so not all convertible terms created equal. I’m glad you mentioned the term a product because I think most people that are watching this and listening to this. You need to start with term insurance. Permanent life insurance is a luxury, we can talk about who should have it who shouldn’t but it’s something that should be a want not a need.

[30:41.16] Whereas I believe term insurance is still a want product because you don’t need anything. It should be a necessity regardless of how much money you make. People should be getting their, they should be covering their money printing machine, which is their lives. That’s just a disclaimer.

[31:00.00] Toby: Or funding their legacy, too. I look at this and I say, insurance the reason you’re carrying it is it needs to have a purpose.If I’m not mistaken, we have term, hey, we’re just buying insurance and something bad happens to me something gets funded which is great for a legacy plan. If you’re young and you don’t have a ton of money, but you want to create something for your family that carries on beyond you.

[31:20.08] There’s cash value permanent cash value insurance, which is high death benefit, lower cash value. Then there is lower death benefit, higher cash value. It sounds to me like almost like that’s a cord. People are trying to play one key on the keyboard. But sometimes it’s better to play a cord and you don’t want to try to solve everything with one key. But sometimes you’re looking at it going. I know that’s my situation. You’re not my agent but I have multiple policies and that’s exactly. I remember sitting down and I used to CFP.

[31:53.00] I was like they were saying, well,  we’re going to accomplish this with this, and this with this. They didn’t try to just jam it down my throat and say this is the one thing you’re going to do. You’re going to eat steak every night, right?

[32:06.20] Caleb: I think that is by default. I haven’t looked at your situation but that tells me that it’s way more intentional than the average person getting an insurance policy.  I think that’s a great example.

[32:18.40] Toby: Everybody should have that. I will say this, I wanted two things that I didn’t hear you say that I want to raise. Number one is the asset protection component of that cash value.  I know that there’s some states where perhaps you can but I’ve never seen anybody sue and try to get the cash value out of an insurance policy. I have tens of thousands of clients all over the country. I’ve just never seen it come up. Have you seen that come up? Is that something you guys talk about?

[32:45.60] Caleb: It’s asset protection is a big part at each state’s a little bit different. But every state has some type of asset protection. There’s actually a story, Enron. This is Enron the executives that committed fraud are still benefiting from life insurance and annuities.

[33:02.20] Toby: We used to call it the OJ. the homestead and the pension and they couldn’t touch.

[33:09.92] Caleb:  I don’t necessarily love that but I love that. And here’s why it’s like if it works for them it’s something that needs to be factored in. Those are the kind of things when we talk about death benefit,the living benefits. I’m not going to call it a long-term care deal, but it’s very similar.

[33:29.80] Toby: I wanted to bring up and I want to hear what you have to say about it.

[33:32.64] Caleb: There’s actual long-term care riders that you can get. But ever almost every permanent life insurance policy that we serve with our clients and most on the market. Have what’s called chronic and critical illness riders. What this essentially means is if you get to a place where you are either given a death sentence.

[33:52.12] You have so much time to live, or you’re unable to do certain activities daily living. You have the option to start spending your death benefit while you’re alive. Without getting too super technical, this might be something you want to do it might not be. But the point is, this is an option that you have that no one wants to think about themselves in that category. But if the statistics it’s  becoming more and more popular as people are living longer.

[34:15.92] It’s one of those things where as your death benefits growing think about that death benefit not just as something that gets going to pass on after you die. But it could be something that you utilize while you’re alive. These are all the things that asset protection, creditor protection, even some of the tax benefits are all things that aren’t even factored into my original internal rate of return number that I gave you. When you factor those things in that rate of return of life insurance goes up and you think about all the other jobs it does for you.

[34:43.04] Toby: I’m glad you brought up the long-term care because my family, my dad passed away from Alzheimer’s, my mom has it, we’re relying on long-term care policies that you cannot get anymore. When you had back in the day that as long as he didn’t let him laughs they weren’t they’re not offered because they’re not winners for insurance companies.

[35:03.80] Caleb: Yeah, insurance companies lost a lot of money a lot.

[35:05.88] Toby: People keep living longer and their bodies are living but the brain sometimes aren’t keeping up. They end up with two of the thing is two of seven activities a daily living and they end up at a long-term care facility or they need an assistant assistance in living. You  don’t want to have to sit there and try to do that type of policy. It’s part of a good insurance policy, a life insurance policy. I’m glad you’re talking about it because I will tell everybody you need to have that because there’s nothing that drains a in a state faster.

[35:39.72] Then these long-term care costs, it’s eight, nine thousand bucks a month to start at a regular facility that they’re going to drain out. You’re going to be paying it. It’s better to have a policy that you can borrow against to cover that. It does lower the death benefit.

[36:01.88] Caleb: It does, here’s what’s great. Traditional policies you can get them and they’re very expensive. It’s one of those, it’s like you don’t want to use it. But if you never use it, you’re out, you could in some cases hundreds of thousands of dollars of what you’re paying. The beautiful thing about blending it with life insurance. If you decide to use it, great, but if you don’t use it, it gets passed on to your heirs in an income tax-free. That’s why I’m glad that some of these things are being included with insurance. Think about it from the insurance company standpoint.

[36:30.88] They’re already on the hook to pay this liability. You call the death benefit and if you’re triggering some of these things, what does that usually mean? You’re getting close to passing away. For them, it’s just one of those like, okay, we’re going to be on the hook here. Why not give you that option? It’s one of those things that’s easy for the insurance company to do, that’s why all the companies do it. And yet it doesn’t really cost them that much in the long run because they’re already underwriting the risk.

[37:00.04] Tobu: I love the way you lay it out. Let’s do this to finish up. When you sit down with somebody how do you make sure that they’re doing the right thing and that you’re serving them in the appropriate way? What are the questions you’re asking and then let’s counter that with what are the red flags that somebody else maybe they’re being targeted to be taken advantage of by an agent who’s selling a product just because that’s what he’s trying to commission?

[37:27.08] Caleb: When I’m sitting down with somebody and at our firm. We’re trying to figure out what is the outcome. There’s usually four common outcomes, there’s an entrepreneur or an investor that they want a better place long term than putting their money in cash and then investing. Or there’s somebody who’s wanting to optimize their retirement. I believe that permanent life insurance can act as a bond alternative to your portfolio and give you lots of benefits that we just mentioned.

[38:00.00] Kind of keep up with bond rates. There’s a lot of people that are just like how do I shift some of my portfolio into insurance to give me, maybe optionality in the future? Where there’s a lot of retirement strategies that you unlock with life insurance. The third type of person’s coming to us and they’re just like, a lot of times is coming with an estate planning person. They’re just like we want a life insurance for an estate plan.

[38:23.92] We’re just you structuring a policy that’s most efficient for them. The fourth one is income protector, 90% of people that come to us. I shouldn’t say to come to us but 90% of people like generally, they should just be protecting their income there. There’s no conversation around bond alternative or high cash value life insurance or legacy planning. The advice of by term and invest difference is actually good advice for 90% of people out there.

[38:51.14] Then it comes down to okay, if you see the benefits of life insurance like myself. I put a lot of money into a high cash value life insurance. Then I use that capital as an emergency fund as a reserve to invest and is just as an opportunity fund and I’m able to deploy that. That’s what I choose to do, but not everyone thinks the way that I think. I do believe that there’s going to be more conversations about this being a bond alternative.

[39:20.12] Because all the options when it comes to distribution planning, a lot of retirement planning is focused on accumulation, but we’re not really talking about distribution. There’s a lot of things whether it’s annuities, or whether it’s a volatility buffers, or whether it’s even things like I’m going to say a horrible two words, reverse mortgages, which can get a bad rap. But they can be used properly. A lot of times they all get better annuities, volatility buffers, reverse mortgages, other buy borrow die strategies that open up. Usually all get better if you have a solid life insurance policy.

[39:52.60] It just gives you another option to consider something. There’s a lot of academic research right now Toby that’s talking about distribution. They’re using actuarial science, which is a fancy way of saying insurance companies to help you create more certainty and more income.That’s a big conversation we’re having with financial advisors fiduciaries people that coming to us because they know that’s where our specialty is/ Obviously, the 1% of people that have an estate problem or really want that next generation to be funded.

[40:22.72] They’re coming to us and trying to back in how life insurance can be used. Those are like the four different ways that people are coming to us. A lot of times there’s a combination of you care about your legacy. We’re trying to figure out what are we optimizing for first because what you said. Sometimes you can’t do it all well, what are we trying to optimize and sometimes that includes one or two policies to do, two or three things well versus trying to accomplish it all in one policy.

[40:51.80] Toby: Then what are the red flags? I mean, there’s Rockefeller people out there saying everybody should have an insurance policy max fund blah. There’s people saying this is you know, the bank on yourself. The infinite banking, put all your money into this huge policy and live off it when you retire flags.

[41:10.80] Caleb: Yeah, I’m going to say something that’s probably going to get me in trouble. Life insurance shouldn’t be more than 20% of your retirement income portion. If it’s more than that I’m telling you that that would be a red flag to me. I personally am not looking to use my life insurance policy to create income. I’m using it as an asset that gives me options. But it’s not one of those things that i’m looking out 30,40 years and going to see that stream of income.

[41:37.92] The other red flag is people putting too much money into it. Always ask this when you’re talking to an insurance agent or financial advisor is whatever your premium going in, figure out how much of it’s required. What’s my minimum premium? How long do I have to fund too? Is it in 10 years, seven years? Is there an exit just? Understand those things. Then my whole thing is the cash value, know this that it’s possible to have 85 to 90% first year cash value.

[42:13.92] If you’re being told that this is the optimal design and you have 40% of cash value in year one. Doesn’t make the agent bad. They could even be right but I’m just letting you know that I would at least get a second opinion. The other thing is having a second opinion and you’re a big fan of having a fiduciary in your corner, I think that’s really really smart. The problem though with fiduciaries, a lot of them don’t understand insurance and so it’s important. Having a second opinion is a no-brainer. You should always have people that are challenging what you’re doing.

[42:47.20] You should do that, but just make sure that the second opinion is someone that actually understands what you’re trying to accomplish and understand insurance. The problem is there’s a lot of people that hate on certain things. No matter what you show them, they’re going to be like, this is a scam and I don’t love the word scam. But I do think that because of Kyle Busch and so many others and we’re going to see a lot more lawsuits pack life.

[43:09.04] Just did a class action settlement over 50 million dollars and that’s one of many to come. People have been abusing insurance and unfortunately it’s given our industry a black eye and it’s and I feel like we’re only getting started.

[43:23.00] Toby: The commissions were too big, it was too tempting. Again, I’m talking to somebody and I’m looking at $50,000 payday for me on something. That seems like it would be a motivator for someone to perhaps or sell something

[43:43.36] Caleb: Technically the Kyle Busch person was a fiduciary. That’s why  it’s funny. It’s you put a hundred fiduciaries in a room, you’re going to get 101 ideas, but the cool thing is they have extra. They can go after that person in a higher way because of the “fiduciary”. I forgot what else I was going to say, but I’m with you

[44:07.52] Toby: I want to just clarify something because I say fiduciary. You want someone who’s going to put your interest before they’re own. The way you know that and you just hit something that I neglected. Even a fiduciary you still want to run the math. You know in tax, we always say calculate, calculate, calculate in anything you do. You should run the calculations. You should have somebody who understands what those numbers mean obviously.

[44:27.84] But you should have a second opinion on whatever it is you’re looking at. And not feel like you’ve done anything [inaudible:00:44:36]. Okay, could you take a look at this and see if the numbers make sense? I’ve done that with many clients where I brought in an outside party. That was not even a, It was just an insurance expert from courtrooms.  I was like, hey, where are the problems in this policy?

[44:47.60] And they blow them up pretty quick because they’re like with the here, here, and here. What about this and then the client gets kind of mad because the person wasn’t telling him. Usually the numbers will tell you this story. Get somebody that knows it by the way, you’re somebody that seems to know it. I’ll put your information in the show notes, so somebody can say hey Caleb, what are you looking? Are you willing to do that first off?

[45:08.72] Caleb: We’re 100% willing to review any policies and if you want a second opinion, even if you want to work with your person. Make us be the bad person, make us be like we’ve done this for people, we’re like, hey this and this and then they just they’d say hey, can you design this and you’ll be amazed.

[45:26.56] You’ll be amazed what’s possible if you just get a second opinion.  I agree with everything that you said and I am a big big fan of permanent life insurance. I think a lot of people in our space don’t love me.  I’ve had people literally say I hope my clients never see your channel. I can’t believe you said that out loud, but it’s just the truth. We’re trying our best because unfortunately, there’s a lot of bad things in our industry.

[45:56.24] Life insurance when set up and used properly isn’t a phenomenal asset. It’s just because credit cards hurt a lot of people. Just because a lot of people lose money in starting businesses doesn’t make starting a business or using a credit card inherently bad. It just means that we got to disclose. I also think it’s important to show people different options and educate them. More information, especially when it comes to your money should be something that you should require. Toby it’s been an absolute pleasure being on.

[46:27.28] Toby: Yeah, I appreciate being on. I will put your channel link and I will put a link so that people can get a hold of you. As always guys if you put comments down below like and subscribe. Share this with anybody that you think would benefit. Caleb, I invite you to come and look at some of the comments. Maybe people will ask you a few questions down there.

[46:45.72] Caleb: I will be in the comment section and look at all the comments. Toby, I’m a big fan of your content and what you’ve created. It’s an absolute honor to be on here. Thank you. Thank you so much for what you’re doing and bringing me on.

[46:59.00] Toby: Well, thanks for coming on and sharing

[47:02.96] Outro: