Deposits versus Premiums

Deposits versus Premiums

The truth is no one pays a Life Insurance premium; you are simply making a deposit.

If your bank made you put money into your savings account each month, would you consider it an expense or a deposit? Most people would agree that it would be a deposit and if they sent us a reminder every month to do so. In fact, we may even be appreciative for the reminder. The key here is in your thinking. An expense is something that loses you money, or costs something. Deposits, however, are money you put somewhere for later use. 

If I talk to you about whole life insurance your immediate reaction may be “that is too expensive. Why would I throw that kind of money away?” We all know (if you have read my other blog posts) that whole life has cash value in it and that is money you have access to borrow against. It is true, that you do not have access to all that money immediately. But, over time, there will be more money in the policy than what you put into it. 

If you put money into an account and you then have a portion of that money to borrow against, is that an expense or is that a deposit? For example, you paid the insurance company their premium of $1000 and they increased your cash value by the same amount, would that be an expense to you?  No, it would not. 

That would be a deposit into an account, just not an account at your local bank. Better yet, you would have a matching deposit from another business into a banking system you own. This matching deposit comes in the form of a dividend and the guaranteed minimum return the insurance offers.  

Some of my clients like to explain it like a savings account. They pay their premium (deposit) and they then have access to money in their savings account, which is just at a different location. You are simply shifting money from a business or a bank that is owned by someone else into a business or banking system that is owned by you.

Perhaps next time someone talks to you about whole life insurance or you get your premium notice in the mail for your whole life policy, take a step back and think again. Because it is the best deposit request you will have ever received.

Hope that helps and clears up a few things. It is a hard concept to grab after being brainwashed for so many years.