Olivia Kirk

We all know cash flow is the lifeblood of any business. Today, we’re going to talk about what the true cost of dealing with a bank is. Not just numbers in terms of how much interest you’re paying, but the true financial cost and the true emotional cost of dealing with a bank. It’s easy to think about dealing with banks in terms of origination fees, interest rates, and loan terms. We know all of that. But what is the true cost of depending on a bank for access to money?

The first and foremost issue is: you don’t control that process at all.

We’ve all applied for a bank loan. You have to show them everything. There could be things going on in the economy that are outside of your control. Your business could be doing very well, but because of external factors, the bank may look at your loan or credit line application very differently than they would have during a time of economic prosperity.

During a recession, 30 to 50% of applications for loans get denied. Think about that. You need more money to run and grow your business to be successful but the bank looks at your cash flow, assets, revenue, everything, and still says, “This isn’t good enough. You’re too big of a risk right now. Sorry.”

So what do you do then? There’s that helplessness. You need access to capital, and the bank is turning off the faucet. That’s a very difficult position to be in. For business owners who don’t have access to a credit line or the ability to get loans, it puts them in a much more difficult financial situation and it inhibits their ability to run and grow the business.

Think about the stress that causes not just financially, but personally. That pressure spills into your health, your family life, and everything else. If you’re not doing well in your business, that stress can carry over into all other areas of your life.

Intuit did a study and found that 61% of small business owners struggle with chronic or cyclical cash flow issues. That same study found that 69% lose sleep or sleep less due to cash flow concerns.

There are countless studies linking lack of sleep and increased stress with health issues. Chronic stress increases the risk of heart disease by 200% and cancer by 40%. Even more alarming? The life expectancy of a small business owner is a full five years shorter than the average American.

So think about this: the stress from cash flow problems many of which are outside your control is literally killing business owners. The irony is that most people go into business to achieve financial freedom. Instead, what they often get is chronic and cyclical cash flow stress. The question becomes: how do we relieve that stress? How do we set ourselves up as business owners so that we are no longer affected by that stress?

The answer is by building a pool of capital that we have full liquidity, use, and control over. The key is to prepare yourself for the inevitable economic downturn or any external factor that could cut off your access to capital. You can’t afford to remain dependent on banks. You need to create your own capital.

That’s why we advocate putting money away during prosperous times so that when the downturn comes and others are struggling for access to capital, you are ready. They say hindsight is 20/20. Looking back, you may or may not have experienced a downturn. But looking ahead, we can all see that another is likely coming. Taking action now to prepare your business, no matter where you currently stand, will put you in a position of strength when times get tough. That preparation gives you an unfair advantage over your competitors and peers. Why? Because you will have access to capital when they don’t. When you have access to capital, you have access to opportunities. If you don’t have money, opportunities won’t come knocking because people know you can’t take advantage of them. As Nelson Nash told me many years ago, “When you have access to capital, opportunities will find you.” And that couldn’t be more true.

At Tier One Capital, we use whole life insurance designed for cash value accumulation. These policies build up a pool of cash that you have full liquidity, use, and control over plus a death benefit.

You can access that money through the loan provision while you’re alive. That means as a business owner, you can use those funds to cover payroll, expand the business, buy inventory, invest in new equipment or technology all of the things that inevitably come up and require capital to move forward.

If you’d like to learn more about how to put these strategies to work for you, your business, and your family, visit our website at www.tier1capital.com and click the “Schedule Your Free Strategy Session” today. 

Thanks for reading, and remember it’s not how much money you make, it’s how much money you keep that really matters.

We all know cash flow is the lifeblood of any business. Today, we’re going to talk about what the true cost of dealing with a bank is. Not just numbers in terms of how much interest you’re paying, but the true financial cost and the true emotional cost of dealing with a bank. It’s easy to think about dealing with banks in terms of origination fees, interest rates, and loan terms. We know all of that. But what is the true cost of depending on a bank for access to money?

The first and foremost issue is: you don’t control that process at all.

We’ve all applied for a bank loan. You have to show them everything. There could be things going on in the economy that are outside of your control. Your business could be doing very well, but because of external factors, the bank may look at your loan or credit line application very differently than they would have during a time of economic prosperity.

During a recession, 30 to 50% of applications for loans get denied. Think about that. You need more money to run and grow your business to be successful but the bank looks at your cash flow, assets, revenue, everything, and still says, “This isn’t good enough. You’re too big of a risk right now. Sorry.”

So what do you do then? There’s that helplessness. You need access to capital, and the bank is turning off the faucet. That’s a very difficult position to be in. For business owners who don’t have access to a credit line or the ability to get loans, it puts them in a much more difficult financial situation and it inhibits their ability to run and grow the business.

Think about the stress that causes not just financially, but personally. That pressure spills into your health, your family life, and everything else. If you’re not doing well in your business, that stress can carry over into all other areas of your life.

Intuit did a study and found that 61% of small business owners struggle with chronic or cyclical cash flow issues. That same study found that 69% lose sleep or sleep less due to cash flow concerns.

There are countless studies linking lack of sleep and increased stress with health issues. Chronic stress increases the risk of heart disease by 200% and cancer by 40%. Even more alarming? The life expectancy of a small business owner is a full five years shorter than the average American.

So think about this: the stress from cash flow problems many of which are outside your control is literally killing business owners. The irony is that most people go into business to achieve financial freedom. Instead, what they often get is chronic and cyclical cash flow stress. The question becomes: how do we relieve that stress? How do we set ourselves up as business owners so that we are no longer affected by that stress?

The answer is by building a pool of capital that we have full liquidity, use, and control over. The key is to prepare yourself for the inevitable economic downturn or any external factor that could cut off your access to capital. You can’t afford to remain dependent on banks. You need to create your own capital.

That’s why we advocate putting money away during prosperous times so that when the downturn comes and others are struggling for access to capital, you are ready. They say hindsight is 20/20. Looking back, you may or may not have experienced a downturn. But looking ahead, we can all see that another is likely coming. Taking action now to prepare your business, no matter where you currently stand, will put you in a position of strength when times get tough. That preparation gives you an unfair advantage over your competitors and peers. Why? Because you will have access to capital when they don’t. When you have access to capital, you have access to opportunities. If you don’t have money, opportunities won’t come knocking because people know you can’t take advantage of them. As Nelson Nash told me many years ago, “When you have access to capital, opportunities will find you.” And that couldn’t be more true.

At Tier One Capital, we use whole life insurance designed for cash value accumulation. These policies build up a pool of cash that you have full liquidity, use, and control over plus a death benefit.

You can access that money through the loan provision while you’re alive. That means as a business owner, you can use those funds to cover payroll, expand the business, buy inventory, invest in new equipment or technology all of the things that inevitably come up and require capital to move forward.

If you’d like to learn more about how to put these strategies to work for you, your business, and your family, visit our website at www.tier1capital.com and click the “Schedule Your Free Strategy Session” today. 

Thanks for reading, and remember it’s not how much money you make, it’s how much money you keep that really matters.

It’s easy to run and grow your business when the conditions are favorable. But what happens when there’s an economic downturn? How can you use life insurance policy loans to help run and grow your business during times of turbulence? According to a U.S. Bank study, 82% of businesses fail due to cash flow concerns and cash flow issues that hold them back. That same study also found that loan rejection rates increase by 30 to 50% during an economic downturn.

So, cash flow is down, your access to money is down how do you continue to grow and run your business during these times? That’s why we advocate very strongly that you position yourself for that ultimate downturn in the economy. Think about it. It’s the factors that are outside your control, and you have to prepare yourself to be able to weather that storm. What better way to do it than to have access to capital? You see, access to capital trumps everything. When you have access to capital, opportunities will find you.

You’ll hear people talk about scarcity and abundance mindset. It’s really easy to talk about the abundance mindset except when you actually feel like there is scarcity when it comes to cash, access to cash, and cash flow. It could be really easy at that time to hunker down and try to get through. But if you have the foresight to build up cash reserves in a life insurance policy, for example, you are actually going to be in a position where you will have abundance. You will be able to use that money for whatever you want.

There are no limitations on how you use life insurance policy loans. There are no qualifications on whether or not you’re able to access that money. The only requirement is that you have the money built up in your policy, and then you’re able to use that life insurance policy loan provision to access that money to weather the storm.

Keep this in mind: your financial situation is going to be compared to everybody else your competitors, your peers. And if you have access to capital at a time when they do not, it’s going to put your business in a much stronger position so that you can actually take advantage of all of the bad things your competitors are going through, and maybe have some opportunities that you wouldn’t have had access to previously.

If cash flow is tight, it’s going to be hard to hire new people. It’s going to be hard to meet payroll. It’s going to be hard to invest in new equipment and technology which is more important than ever these days. And if you have access to money, you’re going to be able to do all of those things, while your competitor, who isn’t necessarily prepared, is going to have a much more challenging time.

That’s the point of having access to capital. Life insurance fits the bill so well because you have two things going on. Yes, you have a death benefit, but you also have an ever-increasing base of capital. It’s guaranteed to have more cash next year than it did this year, and it’s guaranteed to have more cash the year after next than it does next year.

So consequently, you have this perfect compounding, where the money is continuing to increase year after year after year and all you’re doing is putting the same amount of money away. That gives you the access to capital that you need to run and grow your business.

It all comes down to the design of these policies. First of all, they’re designed for cash value accumulation so, early access to cash in the beginning of the life of the policy. This is unique to life insurance policies because typically, with a whole life policy, it takes several years until there’s any cash value you can borrow.

Also, with whole life policies, you’re designing the policies with actuaries. They are actuarially designed to get better and better with time. As you get closer to the end of your life expectancy, the cash value needs to grow faster and faster in order to meet the two promises.

The first promise is to pay that death benefit out anywhere along the line as long as the policy is in force. The second promise is to have a cash value that’s equal to the death benefit at the age of maturity typically age 100 or 121.

In order to meet that second promise, the life insurance company needs to stash away more and more cash year over year so they can meet it. That’s all part and parcel of having access to capital. As the policy grows, as time goes by, the cash value grows greater and greater.

Let me share how a client of ours used this. We set up a policy for them in the late 1990s, and then around 2007 and by the way, they weren’t putting a lot of money into the policy; I think it was like $300 per month but as time went by, during the financial crisis, they had an opportunity to start a business. But they needed capital.

So they called and said, “Hey, do we have enough money in our policy? You said we could borrow against the cash in our policy. Do we have enough cash value to borrow $5,000?”

And sure enough, they did.

They were able to access that money no questions asked.

And that was the thing that amazed them. They just called the insurance company, and the company didn’t ask them what their credit score was. They didn’t ask what they needed the money for. They just said, “Where do you want it? How much do you want?” And that was it. Consequently, they had the money. They opened the business. They used the money to start it, and now that business is worth $400,000. Now they’re at the point in their lives where they’re going to sell the business.

Think about all the income they generated over those years. Now they’re going to sell that business for maybe $400,000 maybe $350,000. That’s an incredible rate of return on a $5,000 policy loan. And it’s one of those things where they didn’t necessarily know what was going to come up, but they knew that, number one, they wanted the death benefit, and number two, they liked having the ability to access the cash if they ever needed to.

So, by taking those steps even without knowing exactly what they were going to use that money for they were able to take advantage of the opportunity when it came knocking on their door.

If you’d like to learn more about putting this system to work for you, your life, your business, your family, be sure to visit our website at www.tier1capital.com and click the “Schedule Your Free Strategy Session” today. 

Thanks for reading, and remember it’s not how much money you make, it’s how much money you keep that really matters.

A client called the other day and asked this question: is whole life insurance a good hedge against economic tariffs? Today we’re going to talk about exactly that how to hedge against tariffs using whole life insurance.

It seems like whenever you turn on the TV, they’re talking about tariffs these days. So it’s natural that people are wondering how to come out ahead with these tariffs being imposed on us.

And not just tariffs, but any type of economic uncertainty. Life insurance is always a good hedge—and by that, I mean cash value life insurance. The reason is because there are three basic, fundamental principles of life insurance that could help anyone during a downturn or times of economic uncertainty.

The first is access to capital. Access to cash is king. It really is. Just knowing that you can access that cash for whatever you want, whenever you want no questions asked puts you in a different, more positive position during economic uncertainty.

With these whole life insurance policies designed for cash value accumulation, they have a loan provision, which is a contractual guarantee that you’re able to access the policy’s cash value through a policy loan from the insurance company. That’s not something you’re going to get in many other places.

That puts you at an advantage.

The second key is that you can use the dividends in a life insurance policy to help supplement your retirement income, giving you retirement income certainty. One of the keys there is that you save on a bunch of taxes that you wouldn’t if you had money in a traditional retirement account or a taxable brokerage account.

With these whole life policies, it’s not something that’s going to go on your tax return. The Social Security Administration is not going to ask how much money you accessed from your life insurance contract this year. It’s totally off the radar when accessed through the loan provision.

Keep in mind that if you surrender cash over and above your basis how much money you put in it becomes taxable. For example, if you paid $10,000 a year for 10 years, that’s $100,000. The first $100,000 that comes out as a distribution from your life insurance is a return of paid premium and is not taxable. But the next dollar over that is fully taxable as ordinary income.

So the key is to avoid triggering a taxable event.

What that could look like is pulling all of the money you paid into the policy out your basis and then, for that next dollar that would be taxable, using the loan provision instead of continuing to surrender value from within the policy.

The third key to cash value life insurance is that it’s a hedge during volatile times. Whether it’s the market reacting to tariffs or geopolitical events, life insurance cash values are not correlated to the stock market. That’s a really good thing.

It’s especially important when you think about how to take advantage of opportunities during times of uncertainty. Because when there’s so much panic in the world, that’s often when the best opportunities arise for those who have access to capital.

Now let’s look at why life insurance is such a great asset during times of uncertainty or volatility. It comes down to the conservative nature of how insurance companies reserve and manage money. Basically, they buy bonds but they hold those bonds to maturity. So fluctuations in the bond market don’t affect an insurance company the way they might affect a bank.

Because insurance companies are holding their assets to maturity, they’re not subject to selling at a loss. That conservative approach is key.

Insurance companies are also limited in what types of assets they can invest in. By nature, those assets don’t fluctuate much. So the insurance company is essentially very good at investing conservatively because of their regulatory constraints and fiduciary duty.

The majority of their assets are bonds, and they hold those bonds to maturity. For example, if they have $10 million and know they’ll need $15 million in 10 years to cover expected death claims, they invest the $10 million in a way that will yield $15 million in 10 years.

Spoiler alert: insurance company actuaries are engineers. And engineers overbuild everything.

So while they plan to have $15 million, in reality, they might only need $12.5 million. But they invest to hit $15 million just in case. That’s a good thing especially when you’re in the business of managing risk.

This is actuarial science it’s not an art or a guess. It’s science. They know when people are going to die, statistically speaking, and they plan accordingly.

So they hold their bond portfolio to maturity. In the meantime, interest rates go up and down, bond values fluctuate but it doesn’t matter. Because they’re holding to maturity, that conservative and certain approach protects them and, by extension, your money.

A great test of that was the COVID-19 pandemic. During that time, more people were dying sooner than expected. Yet, all of the insurance companies stayed afloat. Why? Because actuarial science helped them plan for the future.

Yes, the insurance industry suffered significant losses. But because of their massive reserves, they were able to weather the storm.

And those reserve requirements imposed on them put insurance companies in a position where your money is safest.

So the bottom line is this: cash value life insurance can be a safe harbor during volatile or uncertain times.

If you’d like to learn more about how to put a whole life insurance policy designed for cash value accumulation to work for you, your business, and your situation, visit our website at www.tier1capital.com and click the “Schedule Your Free Strategy Session” today. 

Thanks for reading, and remember it’s not how much money you make, it’s how much money you keep that really matters.

Every once in a while, after completing our cash flow efficiency audit with a business owner and identifying their goals whether it’s business succession, key person retention, or business exit strategies we discover that the business owner can’t get insurance. The question we’re answering today is: How do we achieve these goals using life insurance when the business owner isn’t insurable?

Our health is one of the most fragile things we have. One medical event or diagnosis can make someone uninsurable. So how can we still accomplish goals typically achieved through life insurance if the business owner can’t actually be insured?

One of the most important things life insurance helps solve is access to capital. The way we design policies is focused on cash accumulation. So whether the death benefit is intended for business succession, key person retention, or an exit strategy, the key function of the insurance is still access to capital to run and grow the business.

We’re not only using it for the long-term death benefit. That benefit is triggered by the same event that causes the financial problem the business owner’s death. But along the way, we’re using the cash value that builds in the policy to help the business owner meet financial goals while still alive.

Here’s one simple solution. Suppose the business owner is uninsurable. For an exit strategy, we could insure the business owner’s spouse or adult child. The business owner would still have access to the cash value within the policy. The downside? When the business owner dies, there’s no death benefit, since the insurance was not on them. But if the purpose of the policy is cash accumulation not death benefit that’s not a problem.

At the end of the day, we need to find an insurable body. As long as there’s an insurable interest between the business owner and that insured person, we can properly structure the policy for cash value accumulation.

This works well when our cash flow efficiency audit identifies places where a business owner is unknowingly and unnecessarily giving up control of their money. After identifying those areas, we redirect that money into something more efficient and beneficial often, a whole life insurance policy designed for cash value growth. That way, the business owner can access that money during their lifetime, and depending on who is insured, still recover the cost through the death benefit later.

In this setup, the only variable is when the death benefit is triggered not how the cash value functions along the way.

Let’s take another scenario: business succession. Two partners, A and B. A is insurable. B is not. B can insure A. But what can A do? A could potentially insure B’s spouse or another key employee in the business. Again, if B passes away, there’s no death benefit, but that’s okay. The policy still builds cash value, which the business can use to plan an eventual exit.

The goal of business succession insurance is not only to plan for an unexpected death but also to build up a fund for a buyout or exit while both partners are still alive.

Now consider key person insurance. If the person you want to insure isn’t eligible due to health, you could instead insure yourself or another valuable employee while still accessing the cash value to run and grow the business.

Building cash value in these policies gives you options. You can expand the business, invest in new equipment, stock up on inventory, or take advantage of opportunities as they arise. You can also use it to retain key people, offer perks and benefits, and reduce the risk of them leaving for another job.

That’s the whole point. You’re buying the policy as a strategic business tool for key person retention, succession, or exit planning and the cash value becomes a powerful, flexible benefit along the way.

In conclusion, to purchase life insurance, you need an insurable person someone healthy enough to qualify. But once the contract is in place, you can build significant cash value that’s available while everyone is still alive. Eventually, depending on who the insured person is, a death benefit will be paid. That death benefit essentially recycles the premiums paid into the policy covering the cost of achieving your goals.

If you’d like to learn more about how to apply this strategy to your business and specific situation, visit our website at www.tier1capital.com and click the “Schedule Your Free Strategy Session” today. We’ll do a deep dive on your needs and offer creative, tailored solutions.

Thanks for reading, and remember it’s not how much money you make, it’s how much money you keep that really matters.

You hear us talk about whole life insurance designed for cash value accumulation all the time. But today, we’re going to dive into what actually makes a whole life insurance policy effective for building cash value. And it comes down to one key feature: the Paid-Up Additions Rider.

A whole life insurance contract is already efficient. By design, the cash value continues to grow throughout the life of the policy. In fact, the insurance company promises that the cash value will equal the death benefit at the age of maturity typically age 100 or 121.

But when these policies are specifically structured for cash accumulation, we add a rider, a kind of financial supercharger that accelerates the growth of your cash value so you can use the policy much sooner for major capital purchases.

This rider is called the Paid-Up Additions (PUA) Rider. What you’re really doing is buying a single-premium, paid-up whole life insurance policy inside the framework of your standard whole life policy. It’s like stuffing small, fully paid-up policies into the main policy structure.

Think of your whole life policy as a pool of money, and the Paid-Up Additions Rider as extra buckets of water you’re pouring in to fill that pool faster.

Even better when you buy a PUA Rider from a mutual insurance company, those paid-up additions earn dividends. So, over time, your total dividend payout can grow significantly. This is one way to increase your dividend pot.

You’re earning interest on the base policy value, and these PUAs act as an added cash value component, allowing your policy to grow even faster. With PUAs, you typically have immediate access to 85% to 95% of that contribution as cash for a policy loan.

We always view financial strategies through the lens of control. When your money remains inside the policy and you take a collateralized loan against it, you’re deploying your money elsewhere without interrupting the growth within the policy. This is especially effective when your policy is issued by a non-direct recognition company, meaning the loan does not affect the dividend performance.

A traditional whole life policy becomes naturally efficient over time. But in the early years, years 1 through 5 the available cash value is limited. That’s where the Paid-Up Additions Rider shines. It builds up early liquidity for funding life goals, paying off debt, saving for a car, making large purchases, taking vacations, or even replacing appliances.

Once the policy matures and becomes efficient on its own, you no longer need the rider. The base policy carries the value from there. In fact, it’s common to drop the PUA Rider after 7 to 10 years.

The PUA Rider also adds flexibility. It allows you to contribute more to your policy without increasing your long-term premium commitment. You’re not obligated to make a PUA contribution every year, which helps alleviate a major concern many people have: the fear of long-term premium obligations.

You can structure these policies with a higher premium including PUAs for the first 7 to 10 years. After that, the PUA Rider drops off, and your premium significantly decreases. This lower ongoing premium makes the policy more manageable for the long haul whether that’s 10, 20, 30, or even 40 years into the future.

And even if your cash flow dries up before the PUA Rider’s term ends, say in year 3 or 4, you’re not required to keep contributing. That flexibility is one of the biggest reasons people are drawn to this structure.

Paid-Up Additions can also be a lifesaver during tough times. Life isn’t a straight path. Twists, turns, and setbacks happen. In those moments, access to cash is key. If you had the foresight to add a PUA Rider early, that cash value can be the difference between surviving and struggling during financial uncertainty.

Using whole life insurance as a place to store your emergency fund is a smart move. Not only are you earning uninterrupted compound interest, but you’re also protected with a death benefit, and many policies include a waiver of premium in case of disability. By building up cash value early, you’re creating a financial safety net when the unexpected hits.

As we’ve mentioned in previous videos, Paid-Up Additions also increase your dividend potential. When you view your policy through the lens of control, you realize you can influence future dividends by increasing your PUA contributions. While dividends aren’t guaranteed and are issued at the insurer’s discretion, PUAs raise your cash value so if dividends are paid, you’ll receive a greater share.

If you’d like to learn more about how Paid-Up Additions can help you design a whole life insurance contract built for cash accumulation, to benefit your life, your family, and your business, visit our website at www.tier1capital.com and click the “Schedule Your Free Strategy Session” today. We’ll help you evaluate whether your policy can be rescued and whether a transfer makes sense.

Thanks for reading, and remember it’s not how much money you make, it’s how much money you keep that really matters.

More and more advisors are using universal life policies whether it’s IUL, VUL, or standard UL or the infinite banking concept and for accumulating cash within life insurance. Today, we’re going to talk about why it’s so important to monitor your universal life policies to ensure they’re performing the way you expect and the way you need.

A universal life policy, whether variable (VUL), indexed (IUL), or traditional UL, is essentially an unbundled whole life policy. Whole life is a bundled product the insurance company manages the moving parts. In contrast, universal life separates them: it’s a combination of an annually renewable term insurance policy (where the cost increases every year as you age) and a separate cash accumulation account used to support the policy. These policies unbundle three key components: mortality costs (insurance charges), expenses (the cost to run the insurance company), and interest earnings. Each of these is charged or credited individually in a universal life policy. In a whole life policy, they’re bundled together and managed by the insurance company. The idea behind universal life is that if there are savings in any of the three areas fewer than expected deaths, lower administrative costs, or better than expected investment returns those savings will be credited to your policy as excess interest.

This sounds good in theory, and it’s essentially how whole life works, too except through dividends. The major selling point of universal life is flexibility in premiums. But the problem with flexible premiums is just that: they’re flexible. People often assume that means they don’t need to pay or can pay less. That might be true in one year, but it sets up the potential for failure down the line. Costs can go up or down in any of the three areas. But over time, as conditions change, costs typically go up as we’re seeing in today’s environment.

With whole life, if any of the three components underperform (higher mortality, higher expenses, or lower interest), the insurance company bears the risk. They cannot change the terms of the contract. But in universal life, that risk is shifted often unknowingly and unnecessarily onto the policyholder. Unknowingly, because most people were never told this. Unnecessarily, because it doesn’t have to be that way.

We frequently review clients’ universal life policies either through annual statements or in-force illustrations and often find insufficient cash value and inadequate premiums to sustain the death benefit. The outcome is predictable: the policyholder must either increase premiums substantially or risk losing both the death benefit and the premiums they’ve already paid. The tragic part? People walk away from these policies not because they want to, but because the cost to keep them is unaffordable especially as they age and get closer to the point when the policy is most needed.

What typically happens in underfunded universal life policies is this: early on, the cash value grows because the cost of insurance is low and premiums exceed those costs. But over time, as the cost of insurance rises and premiums stay the same (or are skipped), the cash value is drained to cover the increasing charges. Eventually, the policy lapses. The result? No cash value, no death benefit, and a total loss of everything you’ve paid in.

With whole life, this cannot happen. The insurance company assumes all the risk. And that’s what insurance is for to transfer risk. Just like you insure your home against loss, you insure your life to protect your family or your business from a financial loss.

With whole life, the net amount at risk for the insurer decreases over time, because the policy’s cash value grows. The company is setting aside funds to guarantee the payout at maturity. In universal life, however, that risk is not guaranteed to decrease. If charges exceed premiums, they deduct the difference from your cash value, increasing the net amount at risk at the same time you’re getting older and the cost of insurance is rising.

In other words, you may be carrying risk you didn’t know you signed up for.

So what can you do?

If your health is still good and the policy has enough cash value, you may be able to transfer that value into a properly structured whole life policy. If you’re uninsurable due to health, you’ll need to decide whether you can afford to keep funding your current universal life policy to keep it in force longer than your life expectancy.

Ultimately, you’re going to have to increase premiums.

A properly funded universal life policy still carries risk, but it’s generally funded at levels equal to or higher than whole life. And that leads us to a key question: if the best outcome you can expect from universal life is the same as what you’d get with whole life but without the risk why would you choose the risky route, especially if you don’t fully understand that risk?

If you own a universal life policy, here’s what you need to do:

• Request an in-force illustration each year. Make sure your policy is performing as expected.

• Analyze your premium contributions. The more you pay now, the less you’ll have to pay later.

• Plan ahead. The older you get, the more expensive it becomes to keep the policy in force.

• Ask yourself: Will you pay more in premiums over time than your family will receive in death benefit?

That’s not a favorable position to be in.

We’ve been trained to believe that with insurance, lower premiums are always better. But that doesn’t apply to life insurance. With life insurance, more premium equals less risk. Less premium equals more risk. You have to decide what matters more: saving a few dollars now, or the certainty of a payout later.

If you’d like a free analysis of your universal life policy or portfolio, visit our website at www.tier1capital.com and click the “Schedule Your Free Strategy Session” today. We’ll help you evaluate whether your policy can be rescued and whether a transfer makes sense.

Thanks for reading, and remember it’s not how much money you make, it’s how much money you keep that really matters.

Is there a better feeling than paying cash for a large purchase? You save up and put that money away diligently until finally, you’re able to make that major capital purchase. But today, we’re going to ask: Is cash really king? Is that good feeling truly worth it?

When it comes to paying cash for major purchases, it seems simple: you save the money, and you finally go out and make the purchase. It feels good because you’re not spending money you don’t have, and you’re not paying interest or overextending your monthly cash flow. But how does this strategy actually impact your long-term financial picture?

The reality is, it’s hard to save money. When you’ve defied the odds and built up a strong cash position, the common approach is to spend it on something big: a car, a vacation, real estate. Paying cash means you avoid paying interest. That part is true.

But what’s not seen is the interest you don’t earn when you drain your savings to zero. You’re no longer earning compounding interest on that money. For about 20 years, when the Fed kept interest rates artificially low, savers didn’t feel the opportunity cost. But now, with rates returning to historical norms, we use an opportunity cost of 4% to 5%.

You might say, “But I’m not earning 4% to 5% on my savings.” And we respond “That’s a choice.” We educate our clients about how to position money to earn that kind of return without additional risk, while still maintaining liquidity, use, and control.

So much of how we use money comes from how we were taught how we saw our parents or role models operate. For example, there was a time when people paid cash or used checks to buy groceries. Now, most checkout lines don’t even accept cash.

My own father never had a checking account until he was 73 years old. He only opened one because Social Security required direct deposit. His philosophy was simple: if you can’t afford to pay cash, you don’t need it. Back then, cars were inexpensive maybe $600 or $700 so he’d save and pay cash. He never earned a high income, and when he passed, his estate was worth around $50,000, mostly from a $40,000 home.

That’s not bad, considering. But think about this: had he paid more interest strategically, he might have had three to four times that amount. He didn’t know any better. Like many of us, I was taught to use money in a way that benefitted banks and financial institutions, not myself. Once I shifted to thinking in terms of control, everything changed.

The problem with paying cash is that you never see the interest you’re not earning. That unearned interest vanishes silently, with no statement to remind you. We just assume that money is safe and available. But we don’t realize how compound interest builds over time, starting slowly, then steepening sharply with continued contributions.

The key to financial independence isn’t about paying things off or paying cash just because you can. It’s knowing you can if you choose to. That’s true independence.

Let’s look at a scenario. Suppose you have $100,000 in debt and $100,000 in cash. Your net worth is zero. Someone might say, “You’re paying 7% interest pay off that debt and look at all the interest you’ll save.” On paper, it makes sense. But here’s what’s not seen:

When you pay off that debt, your cash is gone. The day before, you controlled $100,000. The day after, you don’t. Your net worth hasn’t changed it’s still zero but your control has vanished.

So did you actually make progress? Or did you just lose flexibility and optionality?

We see this all the time when people receive large sums of money. They instinctively pay off their mortgage or other debts, especially if they bought term insurance and suddenly receive a benefit. It makes them feel secure but they’re overlooking the opportunity cost.

Yes, you maintained the mortgage payment before. Now, you’ve given up the capital that could have provided further leverage or opportunity. You may feel safe, but you’ve lost control and future earnings.

This reminds us of what Nelson Nash taught: “We finance everything we buy.”
You either borrow money and pay interest or pay cash and give up interest. It’s pay up or give up. There’s no middle ground.

So when it comes to big financial decisions, paying cash might feel good but it can secretly be holding you back.

If you’d like to learn more money strategies specific to your situation how you can get ahead and stay ahead visit our website at www.tier1capital.com and click the “Schedule Your Free Strategy Session” today.

Thanks for reading, and remember it’s not how much money you make, it’s how much money you keep that really matters.

You always hear us talking about dividend-paying whole life insurance whole life insurance designed for cash value accumulation. But what exactly is dividend-paying whole life insurance? Today we’re going to do a deep dive into that exact topic.

Let’s start with the basics. What is a whole life insurance contract?

A whole life insurance policy includes two fundamental promises from the insurance company. First, they promise to pay a death benefit at any point along the way, as long as the policy is in force. Second, they promise that the policy will have a cash value equal to the death benefit at the policy’s maturity age, typically age 100 or 121.

With this structure, you’re getting perfect compounding. In order for the insurance company to fulfill the second promise cash equal to the face amount at maturity they must put aside more money this year than they did last year, and even more next year than this year. That creates a compounding curve starting from zero and building toward the full face amount. So, you’re already earning interest.

But dividend-paying whole life insurance adds a second layer of earnings: the profits of the insurance company. When you purchase a policy from a mutual insurance company, you participate in those profits. That’s why it’s also called participating whole life insurance. If the company earns a profit, you receive a portion of it in the form of dividends, paid out on your policy’s anniversary date.

With a participating whole life insurance policy, the company essentially charges more than needed for the premium, then returns that excess to you as a dividend. These are tax-favored dividends, meaning they don’t typically show up on your tax return. They’re technically considered a return of overpaid premium.

This tax treatment exists because of the lobbying efforts of the life insurance industry. Way back in the early 1900s, when the tax code was developed, the life insurance lobby pushed Congress to recognize dividends as a return of premium not income. That’s why they maintain this tax-advantaged status today.

To maintain that benefit, it’s important to pay your premiums with after-tax dollars. As long as the money stays within the policy or even if you take the dividends as cash they grow on a tax-favored basis.

That’s the foundation of dividend-paying whole life insurance.

Now, how can those dividends increase?

There are two main ways, one of which is in the control of the policyholder, and the other in the hands of the insurance company.

As a policyholder, you can increase dividends by purchasing paid-up additions a feature often referenced online. This rider allows you to put more money into your policy and buy additional paid-up life insurance. If you’re working with a mutual insurance company that earns a profit, a portion of those profits will be returned to you through additional dividends. Because when you own a policy from a mutual insurer, you are effectively an owner of the company as it relates to your policy. So any profits the company earns are returned to you, tax-favored, via dividends.

The companies we work with have paid dividends for over 120 consecutive years, including through depressions, recessions, world wars, gas crises, and tariffs. Think of all the turbulence of the past century yet these companies have continued to pay.

We work with these longstanding, reputable mutual insurance companies because they have consistently rewarded policyholders and provided access to cash value not just at death, but throughout life.

The second way dividends can increase is based on the insurance company’s profitability. That’s why it’s important to choose a company with not only a long history of paying dividends, but also a strong underwriting process. You don’t want them insuring people indiscriminately. To ensure profitability, reputable companies require an application, medical questions, and often a physical exam. The more selective the company, the more financially stable they are and the more reliable those future dividends will be.

Now let’s talk about what could reduce your dividend: policy loans. Some companies penalize your dividend amount if you have an outstanding loan. This is called direct recognition.

In our opinion, it doesn’t make much sense to penalize someone for using their policy the way it was intended to borrow against cash value. We prefer to work with companies that use non-direct recognition meaning the net cash value is not factored into the dividend calculation. The policy will perform as intended whether or not you have a loan.

With direct recognition, the insurer calculates dividends based on net cash value (cash value minus loan balance). So, if you have no loan, your dividend may be higher. If you do have a loan, it might be lower.

The common argument in favor of direct recognition is that it’s “fair.” For example, if one policyholder has a loan and another doesn’t, some believe the latter should earn a higher dividend. But we challenge that logic.

Imagine this scenario: You have a 4% CD at a bank. Two years into the CD term, you go to the same bank for a car loan. A month later, you see your CD rate has dropped. You call the bank and ask why. They tell you it’s because you now have a car loan. That doesn’t make sense and neither does reducing dividends for having a policy loan, especially since the insurance company is still charging interest on the loan.

Whether it’s direct or non-direct recognition, the insurer is earning interest on the loan. So, there’s no reason to penalize the policyholder. To us, direct recognition feels like a money grab even though mutual insurers eventually redistribute profits. On principle, it doesn’t add up, and we aim to avoid it when possible.

Some companies use direct recognition, and some do not. As a policyholder, you can’t control this after the policy is in force so it’s a decision you want to make before choosing your insurer.

In conclusion, dividend-paying whole life insurance policies are issued by mutually owned insurance companies and offer long-term guarantees plus the opportunity to share in company profits.

If you’d like to learn how to put a specially designed whole life insurance contract to work for your family, your business, and your specific situation, visit our website at www.tier1capital.com and click the “Schedule Your Free Strategy Session” today.

Thanks for reading, and remember it’s not how much money you make, it’s how much money you keep that really matters.

When you have a business partner, one of the most important things you can plan for is the death of that business partner. What’s going to happen to the business equity if your partner dies? The solution to that is a buy-sell agreement that defines exactly what will happen. But what many people fail to do is plan for the funding of that obligation and that’s exactly what we’re going to talk about today.

When it comes to setting up a buy-sell agreement, a lot of people don’t realize that they’re setting themselves up for a future obligation: how am I going to buy out my business partner’s equity?

The buy-sell agreement simply directs the surviving partner as to how much they owe and who they owe it to. It creates a financial obligation. What the agreement doesn’t do is set up the funding, and that’s where life insurance becomes essential.

If you have a business that’s worth $2 million and your partner passes away, where are you going to come up with $1 million to buy out their equity immediately?

That’s where life insurance steps in. Think about it: the event that causes the problem the death of a partner can also trigger the solution if you’re using life insurance. The insurance payout goes to the business or surviving partner at the exact moment it’s needed most.

Many business owners believe that the buy-sell agreement is the solution. They sign the paperwork and think they’re set. But if that piece of paper isn’t backed by a solid funding plan, the surviving partner could face serious financial trouble.

Some businesses say, “Well, we have cash reserves. We’ll just use that.” But that can be a huge mistake. You’re tying up a large chunk of capital for an event that may or may not happen soon meanwhile, that money could have been used to grow the business.

If you’re sitting on $1 million in cash reserves, that’s $1 million you’re not investing back into the company. That’s $1 million that’s not generating returns.

With life insurance, on the other hand, you’re paying pennies on the dollar to fund that obligation. You’re freeing up that $1 million to be productive inside your business.

And if you’re using a whole life insurance policy designed for cash value accumulation, you’re building up a private pool of capital along the way. It’s like setting aside money, but better because not only are you growing cash value that can be used during life, you also have the death benefit in place to protect your business when it matters most.

You’re essentially getting one dollar to do multiple jobs. That’s what makes businesses more efficient. That’s what puts you in control.

We always come back to the lens of control. Are you in control, or are you not?

Let’s examine the alternatives to using life insurance for buy-sell funding:

1. Cash Reserves – Ties up capital that could otherwise be used to grow the business.

2. Borrowing from a Bank – Requires paying principal plus interest. You’re repaying $1 million plus more.

3. Paying out of Cash Flow – Redirects operating income, weakening business performance and limiting your ability to reinvest.

All of these options reduce the efficiency and flexibility of your business.

With a properly funded and executed buy-sell agreement using life insurance, you have $1 doing multiple jobs. That same dollar is building a cash value pool you can borrow against while also funding the business succession plan. And best of all, you’re doing all of this with discounted dollars. You’re buying a guaranteed death benefit for pennies on the dollar, which is the definition of wholesale purchasing.

There’s absolutely no downside to that. You’re increasing efficiency, control, and long-term planning all with smart capital leverage.

If you’d like to learn more about how to put this strategy to work for your business and how to properly fund your buy-sell agreement, visit our website at www.tier1capital.com and click the “Schedule Your Free Strategy Session” today.

Thanks for reading, and remember it’s not how much money you make, it’s how much money you keep that really matters.