Why You Should Keep Your Life Insurance (Even When Money Is Tight) (Ep. 288)

If you’re an existing client and you want to cancel your policy, we’re gonna walk through these things. I’m not gonna fight and tell you you can’t cancel it, but I am gonna try to rationally help you understand again why you have it. This is the hardest thing to do is shift our thinking from traditional finance, what we’ve been brainwashed to believe is true, that’s not true. If that were true, why are we not all in a better situation?

Challenging thought process. Hello, hello, and welcome back to the podcast. Thank you very much for being here. All right, today we are going to talk about the fact that life insurance is not a luxury, it is a necessity. And we’re talking about this because I have had this conversation over, and over, and over, and over in the last month or so, to the point where I’m actually starting to talk about it in my meetings before I get the question.

Here’s just a couple examples. I had a client that emailed us and said, “I’m gonna have to cancel my policy ’cause I lost my job.” This was in July. And his policy doesn’t come due until October. He has $7,000 of cash value ’cause he’s, you know, his policy is small, he’s in the early stages of the policy, and he’s like, “I’m gonna need that cash.”

That is the whole point of the policy, is to use the cash when you need it. So this isn’t the best situation ever, it’s not good that he lost his job, but it’s good that he’s got cash value. And so now if he needs that cash value to pay his premium in October, he can do that. If he needs that cash value to live, he can do that.

So what happens is we lose our job, but our premium’s not due until three months. If his premium, let’s say his premium’s eight grand a year. He doesn’t need to pay the eight grand, he could pay the $4,000. He could pay the monthly amount of the $4,000, whatever that works out to be. But he has options to keep the policy. We are looking at life insurance as if it’s a luxury when it is a necessity.

What happens? He’s lost his job, now they have a bunch of bills to pay, and if he dies, there is no death benefit for the spouse to take care of those bills. You plan to not work for three months? Like, there’s a million and one ways to make money, and you’re telling me that you can’t figure any of that out. And so we can possibly get ourselves into a situation, or we can be people, I should say, that if something bad happens, we sit and wallow in our pity for three months, or we get up the next day and with our feet running and figure out how we’re gonna make money.

What are we going to do? I was talking to a friend today, and same thing happened to her client. She lost her job, and she canceled her policy immediately, even though she had plenty of money in retirement to pay for seven years between retirement, investments, life insurance—seven years of money to pay for expenses, and she freaks out and cancels her policy right away.

There was a gentleman in one of the infinite banking Facebook groups, and he posted and said, “We just bought a new house. I can’t afford my premium now. Does anybody wanna buy my policy?” And first of all, I commented because I could not help myself. Nelson talks about Parkinson’s law, right? We talk about this all the time. Part of Parkinson’s law is that your needs will rise to meet your income. Well, in this case, we’re not beating Parkinson’s law. We’re actually losing to Parkinson’s law because you’re telling me that you bought a home and you now can’t afford your premium.

So you’re looking at your life insurance as a luxury, not a necessity. “So you want to sell your policy, and you want to get rid of that premium payment, and then you want to start a policy again in two years,” he said. “Why not just borrow from your policy and not pay interest only for two years?” He was in—if I’m correctly remembering, he was in, like, year three to five of his policy.

So at that point, your policy is typically cash flowing. So if you’re putting $10,000 of premium in, your cash value is going up by 10,000. So it becomes this pass-through entity where you pay your premium, you turn around, you borrow it out, pay interest only on that loan, and then when you have the funds, pay it back.

So the very time that he should have life insurance—should something happen to him and his wife should have the money to pay for their home so she’s not homeless—he wants to actually get rid of his policy. What? What happens is when we have low funds or commodity prices fall, whatever happens in our world, maybe we lose a job, maybe our business isn’t doing so good. Immediately what we do is we go and we cut our insurance. We cut things out of our budget, and here’s another one.

I have a client that said, “Well, Mary Jo, we can’t afford these premiums.” This is my fault now. Like, hear me out here. “We can’t afford these premiums because we bought these before we had kids, and now we have kids and we can’t afford them. This isn’t my fault. You should have thought of that when you started your premium.” Like, what?

And I posted about this on my Without The Bank page. You’re telling me that you had kids and now you can’t afford your premium? You didn’t figure out how to work the kids into your already budget that you have? Once again, we’re cutting it as luxuries. That’s like saying, “I had kids, so now I can’t afford my house payment.” What do you? What? Or these same people send their kids to private school. You found the money to pay for private school, but you don’t have the money to pay for your life insurance.

So if something happens to you—which I shouldn’t say if, when something happens to you—there’s no death benefit to make sure that your family’s taken care of. Like, if you actually think about that, it makes you shake your head a little bit. Because this is what people think about before they meet with me: “Mary Jo, I don’t know where I’m gonna find the money to pay for the premium.”

Well, A, that’s what we help you with, but then you have to change your mindset around money. Because we’re looking at it as if life insurance is a luxury when in fact we are going to die. You aren’t getting out alive. I’m sorry to tell you. I’m the bearer of bad news here. You’re gonna die. You will not at some point wake up. Okay? If you have a family, a young family, your main concern should be how do I keep my life insurance? Not “I have to cancel it” and then you really start to think about people and their priorities.

So I have to cancel my life insurance policy, but I can still go to the bar and I can still have a drink with a buddy. I can still buy alcohol for at home. I can still maybe go on a trip, I can still buy the luxuries of pop and chips and all the things that we have. Are we cutting back on every aspect of life, or are we immediately just going to what we feel is expensive and that’s not a priority ’cause we’re young and we likely won’t die?

Hmm, interesting. I’ve had a 27-year-old die. I’ve had a 32-year-old die. I’ve had a 40-year-old die. I’ve had a 47-year-old die. I’ve had a 52-year-old die. Guess who I haven’t had die? People over 65. I’ve only had two death claims over 65 years old. Two. Just ’cause you’re young doesn’t mean you’re not gonna die. You will die. We just don’t know when, and life insurance is a protection for that. And because we’re scared to pay a premium ’cause we think of it as an expense and we don’t truly understand and can’t get our head around how it works, we look at it as a luxury.

If that policy gets to the point where it cash flows, meaning I pay my premium and my cash value goes up by the same amount, which typically happens in year three to four of the policy. Do I have an expense? Yeah, I have to pay premium. Does it feel like an expense? No, because I get to borrow against that money in 10 days. Do I have to pay it back? Yes. Do I have to pay it back at a certain amount of time? No. Does the insurance company care? No, because upon your death, they have your death benefit as collateral ’cause you’re going to die. It is a secured loan to the insurance company.

By year seven to 10 in those policies, sometimes year six, we break even, which means our premium that we’ve put in equals our cash value. Any time after year three or four, that cash value is growing every single year by more than what you put in. You have access to more than what you’re paying for premium. Our problem is our mindset. It is that society has taught us that life insurance is an expense and not an asset.

The life insurance policy is just the step before you borrow it back out to put it in checking. If you’re using cash, you are going to take $10,000 of cash, you’re gonna go buy whatever it is you need to buy, and you’re gonna sell commodities, and you’re gonna put the $10,000 back in savings or checking, and then you’re gonna use it again, and then you’re gonna sell commodities and put it back. The life insurance policy, you pay your premium, we turn around, we borrow it, we pay it back. We turn around, we borrow it, we pay it back. It’s just the one step before it gets to somebody else. Because this one step is compound interest and dividends.

I met with a gentleman last week, and he had read the book, and he said he threw it aside, and he said, “Well, I can do this without her. I don’t need her.” So he started using his mutual fund account to farm without the bank. And I made fun of him. And if he’s listening, Don, I’m totally making fun of you. I said, “Oh, we’re gonna farm without the bank Don’s way.” And he goes, “Yeah, it didn’t work like it, like yours does.” No, because you had it in your mutual fund account. You took out your $120,000, and then he put it back. He understood. It registered again, and he read the book for the second time, and he said, “Oh, I had lost opportunity cost on my money.”

Yes, you did. You didn’t get the money into the policy for compound interest and dividends. We didn’t buy death benefit for your family on it, which is absolutely super, super important to him because his wife is uninsurable, and he wants to make sure she’s taken care of. That’s very important. And so can you use cash? Yep, you sure can. But you have lost opportunity cost on money ’cause you don’t have the uninterrupted compound interest, and you don’t have the death benefit. So we have to have those conversations.

As soon as we lose our job, commodity prices fall, whatever it might be, we emotionally make a freak-out decision that is we have to cut back. Instead of us asking, “How can we continue to do what we were doing? What other things do I have to do?” Et cetera. But we’re not doing that. We’re not actually sitting down and paying attention to the policy. Because like I’ve said before, we open the bank, and then we lock the doors, and we never come through it again.

So the people that are usually freaking out about their policy are the people that don’t listen to this podcast. So they are not getting refreshed. I just got off the phone with a client that I’ve not talked to since 2019, and it was super good catching up. But she said, “I listen to your podcast all the time. Even though I don’t call, I’m listening all the time.” So when I talked to her today, she was more educated about what she has than she was in 2019 because she’s continued to listen to the podcast and have the education.

Even the gentleman that put my book aside, he was still listening to my podcasts because he ended up talking to Michelle on long-term care before he started talking to me. And he was telling Michelle, and Michelle said, “You better meet with Mary Jo.” So these podcasts are for continued education, so you’re continually learning how to think differently and rationally, in my opinion, about your money.

We want to make sure we save our life insurance policies. We want to make sure we get those paid and make those a necessity, not a luxury. Beer is a luxury, unless you’re an alcoholic. Beer is a luxury. Junk food is a luxury. Eating out is a luxury. Life insurance isn’t a luxury. It’s a necessity, and the times we want to cancel it is when we actually need it the most should something happen to us.

I have heard, not a lot of stories, but I have heard stories from people that say, “My husband’s policy canceled two weeks before he died.” Or I have a really good friend who her husband was going to sign his policy, and he was killed in an accident, going to get his life insurance policy. It has not happened to us yet that somebody has died waiting to get their life insurance, and I hope and pray that in my career that does not happen. But it happens to other people. It is definitely something to be concerned about ’cause we don’t get to pick the day and time, as you know.

So just a little mindset shift today of how to think about this premium. If you’re an existing client and you want to cancel your policy, I’m gonna—we’re gonna walk through these things. I’m not gonna fight and tell you you can’t cancel it, but I am gonna try to rationally help you understand again why you have it. If you haven’t gotten your policy, you have access to that money right away.

This is the hardest thing to do is shift our thinking from traditional finance, what we’ve been brainwashed to believe is true, that’s not true. If that were true, why are we not all in a better situation? Challenging thought process. I had a potential client tell me today, nope, she’s not moving forward. They’re not ready to commit, and I know why they’re not ready to commit because of the fact that they have other people in their lives telling them that this is a big scam.

The gentleman that I talked to last week said the same thing. Or I talked to a different gentleman last week that he said, “Everybody I talk to says, ‘No, that doesn’t work that way.’” Even his sister that worked in the insurance world who had borrowed money against her policy to build a house said, “I don’t know that it can work that way.” And so we’re getting guidance from a bunch of people that are not professionals, and we’re allowing them to confuse the matter with incorrect information.

So we really just have to pay attention to who we’re talking to and who we’re surrounding ourself with. If you are a client, you already got an email inviting you to our client-only summit. If you’re not a client, you’re not invited. If you are a client, we are having our client-only summit in January in Arizona.

If you want to be around like-minded people and have a fantastically fun time, as well as educate yourself and listen to some amazing speakers, check the email, get registered. Because here’s what happens at those summits: it’s not so much the information that you’re getting—that’s great—but it is being able to sit in the bar, to sit in the lounge, to sit outside at the patio and talk about your policies, how you’re using them, how you’re thinking about them, and have that conversation and create those relationships with other people.

I have clients that are friends that have come to those summits and met one another, and they’re friends, and they message back and forth, and they run strategies with one another, and they don’t call me as much anymore ’cause they’re talking to one another. It is an amazing time because now you’re in this world of everybody is telling you, “This isn’t true, this isn’t true, this isn’t true,” but now you’re in a room with people that have been using the policies for ten years, fifteen years, five years, three years, two years, and you’re seeing that you’re helping one another. That is extremely important.

So if you are a client, make it a priority to come to the summit so that you can be in that room with people. You can create those relationships. It’s a game changer. All right. You guys, grab the book. For those of you that aren’t clients, grab your book. If you’re a client, reread the book.

Let me know if you have questions, comments, concerns. Mary Jo at withoutthebank.com. Otherwise, you have a fantastic rest of your day.