Recently, Dennis had the privilege to interview Kim D. H. Butler, founder of Prosperity Thinkers, a company offering whole life insurance solutions for storing cash and creating liquidity. She is one of the top thinkers in the finance industry. With years of experience and a deep understanding of personal finance, she shares her insights on a powerful financial tool—whole life insurance.
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Please Explain What Whole Life Insurance Is
Kim shares that whole life insurance is like a savings account. It is a financial tool that allows you to save and invest your money simultaneously. It serves as a secure storage account for your funds.
Is It True That You Only Need Life Insurance When You Are Older?
According to Kim, there is a ton of confusion about life insurance. Some would refer to whole life insurance as regular life insurance when, in fact, the latter comes in two forms. One of them is term insurance. It is what most people think of as life insurance.
You get a death benefit or a lump sum payout if someone covered by the policy passes away during the term. It is essential for anyone with obligations, such as car loans or student debts, to have term life insurance once they turn 18. As you build savings, you can consider whole life insurance, which is a more efficient place to store your emergency fund.
Why Are Wealthy Families and Entrepreneurs Turning To Whole Life Insurance as Their Bank?
Whole life insurance is a centuries-old product that has consistently proven itself. Kim shares something she put together: WL + T = HLV (Whole Life + Term Insurance = Human Life Value). When a baby was born into the family of one of Kim’s friends, a trust was immediately established because that’s what wealthy families do.
That trust holds stock in the company the family owns. The baby at day one is worth $18 million and can qualify for their human life value, which is $18 million. That’s 1 x gross worth. That family, then, can replace that generation’s wealth upon death. So, the grandparents own insurance. When they die, the tax-free life insurance income pays into the estate and regenerates that wealth.
And when the parents die, their life insurance pays in and regenerates that wealth. When the baby is older and passes on, their wealth regenerates. It enables the generation to spend all the wealth and regenerate it for the next generation. Super-wealthy families do not spend all of it, but that is what goes on.
When Does It Make Sense for the Average Person To Consider Whole Life Insurance?
Kim explains that whole life insurance is accessible to people of all income levels. Young adults with part-time jobs can start with as little as $100 monthly. As your income grows, you can save more, creating a sturdy financial foundation. The key is to begin saving and investing early to build your financial future step by step.
It is paid either monthly or annually, so you do not need to have a lot of money to start investing. And if you do it right, your savings will increase as your income increases. Store that money in whole life and build portfolios of policies just like how people build portfolios of stocks. You will build an investment arena at the same time.
The cash value of your life insurance policies is growing, and that death benefit will stay at the human life value number. That is where your whole life plus term insurance equals the human life value. Whole life is going to be the base policy you can afford.
Are You Required To Undergo a Physical Exam To Ensure You Are Healthy?
Kim says that insurance companies are starting to waive the physical exam requirement because they can get as much information as they need about a person from online sources. However, if you are over 30, you will have to undergo a physical exam.
Please Share Your Favorite Success Story Related to Your Business
Kim shares that she once had a client who invested heavily in real estate in Florida and purchased life insurance at about the same time, 20 years ago. Unfortunately, his properties in Florida got hit by a hurricane, and his insurance did not cover all the damages. To pay the premiums for the next year, he borrowed against the cash value of his whole life insurance policy.
It was his third year in the policy, so it was a fail first, then succeed story. He calls back the next year and says that he is still trying to rebuild his real estate investments. He is unable to pay the premium. By paying a premium previously, he increased his cash value enough to enable him to borrow against it again and pay another premium to buy himself more time.
After some time, he finally got his real estate investment going again and used the cash flow from it to pay the loan back. It took him about three years to pay it off. All this time, his cash value grew and remained unaffected by the loan. So, whole life insurance works just like real estate. You have an asset and a corresponding lien against it. The cash value grows while the debt shrinks.
So, the gentleman is whole and paying his premiums again. He buys more investment real estate and now owns a lot of properties. He used the cash value, borrowed against it, and paid it back, not as a mortgage but as opportunity money to make a deal happen quickly or repair money when he had to do some repairs.
He can utilize the death benefit combined with his investment real estate through a charitable remainder trust to sell real estate without paying capital gains tax. It will be a valuable strategy for him. Most people ask about using cash value while they are still living. It is fabulous because you can use it for emergencies and opportunities.
When combined with other assets, they can utilize the death benefit of their whole life insurance, and it is not until you are in your 80s and 90s. The utilization of the combined assets is even more valuable than the utilization of the cash value.
Is Having Your Own Personal Bank Where You Can Borrow Against Yourself Considered Leverage?
Kim says there is a lot of confusion around the concept, and the people talking about it on YouTube and TikTok are adding to the confusion. You are indeed borrowing money against yourself, and it comes from the life insurance company. What happens is that your cash value grows and remains unaffected by a loan.
If you have $100,000 of cash value and borrow $60,000 against that to invest in real estate, your cash value stays at $100,000 while you have a loan of $60,000 from the life insurance company against your cash value. You could borrow as much as 90% of your cash value.
The interest you pay the life insurance company is usually a fixed rate of around 5% to 6%. Some variable rates were about 3% to 4%. Those variable rates are now in the 7% to 8% range. Kim recommends choosing a fixed rate when you borrow against your cash value from the life insurance company. You will pay the interest to the life insurance company because you used their money.
Kim goes back to the question. Let us pretend the loan rate was 6% and the deal you invested in was 12%. That is a 100% return. You have a cost of 6 and a gain of 12. Meanwhile, your cash value of $100,000 is earning you about 4.5%, and its growth continues uninterrupted and unaffected by the loan. Since your earnings from your investment are more than the cost of your loan, you can use that income to pay the loan and repeat the process.
Why Should Anyone Borrow Money That Way Instead of Just Borrowing From a Regular Bank?
Kim says that it will depend on the interest rate and your capability for borrowing. It is the speed and hassle factor. For example, if you have a line of credit and it is at a 2% deductible, you should use your line of credit. There is nothing magic about life insurance loans.
But let us say we were in a different interest rate environment, and your line of credit is at 10%. And to use that credit line, let us say the bank wants your first child and ten tax returns. You would prioritize the life insurance loan if the interest rates are lower. That would be one reason, and the hassle factor would be another.
However, if I can get bank money, I will use that first and keep my life insurance money for emergencies and other opportunities. You have to look at the interest rates. It is never an all-or-nothing situation. Nevertheless, some people have pulled off some real estate deals using a life insurance loan with a higher interest rate simply because of the speed and lack of hassle factor.
What Do You Envision for the Future of Whole Life Insurance and Infinite Banking?
Kim explains that in uncertain financial times, whole life insurance remains a reliable and stable asset. The insurance industry has been around for a long time. This product is about 600 years old and has gone through many uncertainties. Of course, it will not come out perfectly every time.
But over somebody’s whole life, the use of cash value and its efficiency to grow without taxes proves that it is a very safe, solid, and effective product. And even if they decide to tax it, you still have an environment where the rate of return is a few points higher than bank savings rates. Life insurance companies are safer than banks because the former stores $1 for every $1. They do not engage in the fractional banking environment that all banks do.
Are There Questions That You Wish People Would Ask You?
Kim reveals to Dennis that she wants people to ask if she practices what she preaches, and the answer is a resounding yes. My family owns over 20 whole life insurance policies. I started buying life insurance when I was 24. I did not know what I was doing at that age, but I did it anyway. We also purchased the same for our key employees because we build a portfolio of policies, like how people build portfolios of other things.
We believe in investing in ourselves and our businesses, so we are focusing on. We made financial mistakes along the way. We have learned from both successes and mistakes along the way. I look at my life as a series of winnings and learnings.
How Can Our Readers Learn More About Kim D. H. Butler and Prosperity Thinkers?
People can visit our website, prosperitythinkers.com. We offer various educational materials to accommodate different learning styles, ensuring you gain the confidence to make informed financial decisions.
Secure Your Financial Future Now
In a world filled with financial advice, we should learn from experts like Kim Butler, who offer sound and practical guidance. Whole life insurance and infinite banking may be unfamiliar concepts that can transform your financial future. With Kim’s expertise, you can take control of your finances, secure your wealth, and build a prosperous future for yourself and your family.
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