[Music] A record-breaking year For life insurance payouts Um a hundred billion dollars was paid Out in 2021 From life insurance companies to Beneficiaries so um that is actually an 11 jump from 2020 which represented the Largest year-over-year increase 15 Since 1918 Influenza pandemic Um so that's crazy so Um All right Life insurance yeah whenever I have a Financial planning call for Ewell University I always get the most Questions about life insurance it's an Ongoing thing like every single time so It's never a bad time to talk about life Insurance because I realized that so Many people still have so much questions About life insurance but I want to talk about it but I want to Get you guys opinion on it before before I start talking about it so yeah all Right a hundred billion dollars was paid Out last year from life insurance Companies to beneficiaries so what's Your initial thoughts on that I'm a little conflicted to be honest With you right to speak for a couple of Reasons the first reason is that if it's
Paid out that means people actually had It and I'm telling you when we sat down 15 20 years ago and we were talking About life insurance it was not even a Topic in our community like nobody was Even interested in caring about it now Out of that 100 billion I'd be Interested to see how much it was paid Out for communities that look like us That is a statistic I would like to see But I don't know it Is it encouraging I'm torn I'm honestly just talking about It but why are you torn because If it we know that that that's a form of Uh a way to generational wealth right Like for our communities that hasn't Been obeyed but we know that it is now And obviously what you're doing and Everybody is doing in the financial Literacy movement talking about it and Showing how it can be a builder by for Generations out of here outside of us 100 billion is obviously a huge amount I'm just saying how much of us are Represented in those numbers Right so like yeah it's great that People are aware that life insurance can Be a building block are we aware and are We represented inside that 100 million Billion Well that should be a question Yeah I mean that's what I'm saying I'm Trying I don't I'm conflicted on it I
Don't know Um To be honest um I haven't done enough Research on this topic so I think it Would be a disservice to the audience Myself and this amazing show to give Commentary that is not based on fact or Research um I know some people think I Just rant because you know I like Attention this this is backed by God and The work that I put in so I don't um but Troy your point is really interesting I Wonder how much of those payouts were Dispersed house especially from the Conversation that we have with Don uh People's last night I would estimate probably less than 15 But I do want to give a homework Assignment Um for the money that has been dispersed Over the last five years to the audience How much of that goes to black and brown Families Um and it's not because we're not Applying because I know a lot of people Say well if people apply to get it I Have personally went to situations where Family members have poured into a policy For 20 and 30 years and did not get Their projected earnings upon I suppose Getting that death benefit but I think It would be a disservice to me to speak On this one you see that 15 you think Really quick because like even even when
We do have it I feel like especially like if people Have insurance to their life insurance Do their job the amount is like so low Right like even when I I told people When I was 25 like I have a million Dollar policy was like how did you do That like why would you do so much and I'm like well it's for the years of the One I'm going so the mindset wasn't even In but I mean this this guy's the expert At it come on Charlie come on go crazy I Feel it well I feel like yeah there's Two different conversations having Happening Um if we're taking advantage of it or Not that's a conversation that we we Don't know we'll have to see the numbers I would suspect that there has been an Uptick but I would think that we're Still underinsured as a community I Would I would think that we're still Under insurance now that's one Conversation the other conversation is Okay a hundred billion dollars is being Paid out we understand that life Insurance is one of the fastest and Easiest ways to grow generational wealth Because you're pretty much paying for For money Pennies on a dollar right like If you have a life insurance policy it's A million dollar policy let's say you've Paid a hundred thousand dollars of Premiums before you died then you've
Purchased one million dollars for a Hundred dollars and that's a good deal In anybody's book right Um so but it's important to understand The life insurance that you're actually Getting and how the process works so Like even within we're saying that you Know a lot of people they might have Paid into a policy for 20 years or 30 Years and then they don't they don't Actually get or the policy you know Expires or explodes or different things That they should because Not all life insurance is created equal That's something that's extremely Important to understand as well so when You're buying your life insurance policy It's important to be educated on on what You're purchasing and just like anything Else like if you're purchasing a home or If you're purchasing a car every car is Not the same every home is not the same Right you have to be educated on what You're actually purchasing so you can Have the most efficient outcome when it Comes to that so Briefly because I've talked about this a Few times but Term insurance Very important to understand Um that is the lowest costing Insurance Lowest premium it lasts a term you know 10 15 20 year term where you pay a Premium you have a death benefit let's
Say you have a 20-year Term Policy right You pay a premium for 20 years and if You pass away before that 20 years is Over then your beneficiaries get money Um now the problem with term insurance Is that I think like 97 of term Insurance policies don't actually end up Getting paid out because most people Don't die within the term so to get Insurance you have to be approved for Insurance right and there's Underwriters So they're usually not going to approve Somebody that has a high probability of Dying within a 20-year term so anybody Can die at any point in time but you go By odds right and it's mathematical Statistics so it's like the odds of Somebody that's 25 and they're healthy Dying in a 20-year Next 20 years is relatively low so now You can afford as an insurance company To give you know Insurance to a lot of Different people because you know only a Few people is actually going to die and A few people that do die the other you Know 97 percent of people that don't die Those premiums are going to make up for That Um but it's still beneficial because Some insurance is better than no Insurance and if you don't have a budget For anything else then Term insurance can be a good option and Then you have whole life insurance which
Lasts your whole life And it also builds cash value the cash Is money that you can actually use while You're alive now a lot of people have Criticized whole life because they say That it's too expensive and they don't Want to mix Investing with permanent Insurance your Own personal prerogative on that there's Pros and cons for it but The general idea of it is that it lasts Your whole life but there is a hybrid Approach uh guaranteed protection Universal life we've talked about the City University alone a lot where this Is a pretty much like a lifelong Term Policy so you're paying premiums and as Long as you pay a premium you have a Death benefit so that's extremely Beneficial because now if you don't want To mix investing with insurance and you Just want You know the Clean Cut just whatever I Pay for I'm Gonna Get You know if I die My family gets money Then that's that's an option and the Premiums are less than whole life Insurance but they're more than turned So you kind of get in the middle ground For that now where people come into Problems with their policy a lot of Times where they don't fully understand It as universal life policy index Universal life policy and variable
Universal life policy this is life Insurance that's tied to the stock Market now this is where it kind of Becomes a little tricky because there's A lot of variables that go into play so This is a hybrid type of insurance Policy where you're actually mixing Insurance with investing the problem With this is that if you don't fully Understand it and in times like even now When the stock market is down now that Can draw on your cash value and Negatively affect your insurance policy So this is something that you have to be Extremely educated on if you're going to Mix the life insurance with investing You have to know how much money you're Putting in you really want to over fund The policy in that scenario to make up For any down years in the stock market And you have to be careful when you take Money out so Like I said I can go on for this for a Long time but I actually just wanted to Two questions for you I'm going to cut You off I want you to finish budget Before we go to the next one I do have Two cool questions for you that I think Um if you let's say a person is making a Hundred thousand dollars a year What is the multiple that they should Have For the death benefit when they pass So yeah good question and you know of
Course it goes by like if you have a Family or house but rule of thumb is That you should always have probably 10 Times your income so if you're making a Hundred thousand dollars a year you Should have at least a minimum of one Million dollars life insurance policy You might need more like I said if you Have kids if you have a mortgage you Might even need two million or 2.5 Million but at the very least you need 10 times Your um your income that's like you know Rule of thumb and that might seem like a Lot But it's really not so if you think About it from a standpoint of all right Let's take a million dollar policy right And let's say you're making Let's say you're even making fifty Thousand dollars a year so we'll do 20 Times your income for this area let's Say you're making fifty thousand dollars A year right Um now you have a million dollar policy So what happens is that When you die your beneficiaries have an Option usually and this is why it's Important to educate your beneficiaries As well but your beneficiaries usually Have an option where they can take a Lump sum or they can take Um it's kind of like a checkbook when an Insurance company will send them a
Checkbook and they can just draw off of The insurance policy whenever they need The money but let's say that they Actually just take the lump sum of one Million dollars The million dollars is going to be a Tax-free uh million that's going to be To your family nine times out of ten so You get a million dollars so now the the Worst thing that you can do is just give Somebody a million dollars with no plan Because we know that they're going to Blow that million dollars very very Easily right so now and this is what Storm Leroy was talking about if you set The million dollars up well you can set It up in a trust or even if you don't Set it up in the trust you could just Give them directions on how to actually Invest it and let's say that they just Invest the money in long-term Conservative Index Fund right and They're drawing let's say they draw five Percent off of that Um why do I say five percent because That the Monte Carlo stimulation factor Is that if you draw five percent over The course of time then you'll never run Out of money that's like a retirement Formula so if you take five percent from A million That is fifty thousand dollars right so That's really replacing your income in That scenario so when you look at it
From that standpoint if you look at okay Even if you go higher you'll say even if You take seven percent off of every Single year every year you're taking Seven percent off and that's higher for People that's taking money from from Their accounts now you have seventy Thousand dollars a year still that's Still It doesn't seem like that much money Right you're just replacing your income Pretty much so it's not like you're so If you're making a hundred thousand Dollars a year you're probably walking Away with sixty five thousand dollars so If you have a million dollar life Insurance policy and you're drawing Seven seven percent seventy thousand You're pretty much just replacing your Income at that point in time so this is Why it's beneficial to have more than And you got to realize too if you're Making a hundred thousand dollars and You have a hundred thousand dollar Policy I mean that's just one year like You might live for what your family's Gonna need money for 20 years your Family gonna need money for 30 15 years So it's important to think bigger so That was kind of a long answer to the Question but I just wanted to Rationalize it because I know if I just Say like you need a million dollars Worth of insurance people like I don't
Need a million dollars like I'm not I Don't even have a million dollars why Would I need a million dollars well hey That's not the best way to think about It because you want to leave more money Than you have but also just from a pure Practical standpoint of replacing your Income because that's what life Insurance is for Um you're going to need a bigger number To replace what you're currently living On What's up
