The Greatest Life Insurance Scam Ever

Paula: [00:00:00] Welcome to another episode of Chatting with the Experts. I’m Paula Okonneh, and I speak with phenomenal women from Africa, from the Caribbean, and in the diaspora. Today’s episode is:
Is Your Income Properly Protected? And my guest, who will be joining me in a few minutes, says protecting your income is very important, and she says this all depends on who is dependent on your income, whether it’s your spouse or your children.
I’ll tell you a little bit about her. She’s a licensed advisor, financial advisor in Los Angeles, California, and she educates people on life insurance protection and how to invest properly in their retirement. She continues to make a difference in her community by trusting God and by helping others. And with that, I want to welcome Deidre Knighten [00:01:00] to Chatting with the Experts.
Welcome.
Deidre: Good afternoon. I am so excited to be with you, Paula. I’m excited about what we’re gonna talk about, and so I’m excited to be alive. So-
Paula: Me too.
Deidre: So just to recap, I talk about income protection.
Paula: Mm-hmm.
Deidre: A lot of people like to call it life insurance, but really it’s income protection.
Paula: Mm-hmm.
Deidre: And what I mean by that is if we have a husband and a wife and a child, and one day the husband doesn’t come home, those bills still keep coming.
Paula: Mm-hmm.
Deidre: So you’re protecting the income that comes into the household.
Paula: Mm-hmm.
Deidre: So if you’re just a single mom and your child is just dependent because you’re a single mom on your income, and God [00:02:00] forbid one day you don’t come home, who’s gonna protect that child’s future?
So I like to think of it instead of life insurance as income protection.
Paula: I love that.
Deidre: It’s very important, and we don’t have to have income protection the rest of our life. So I’m also gonna talk about whole life as opposed to term insurance.
Paula: Okay.
Deidre: Just protecting for the time you need it. And what I talk about is buy term insurance, which is the cheapest form of insurance, and with the money you save, you invest the difference.
So that’ll take me into investing and the rule of 72 and a lot of things that especially people in our community have not been taught.
Paula: That’s why you’re here.
Deidre: We’re taught to be consumers and not investors.
Paula: [00:03:00] That’s why you’re here. So let’s talk about something you touched on, buy term and invest.
I love that word invest because as you said, we are taught to be consumers and not investors. So let’s talk about term insurance. You say you don’t believe in the word term life, so let’s talk about term.
Deidre: No, what I said is I don’t believe in whole life insurance. I don’t be- Oh. I don’t believe in having insurance for your whole life.
Mm-hmm. ‘Cause that’s a death benefit, so you’re betting, you know, “I’m gonna die.” We all are gonna have to answer one day.
Paula: Mm-hmm.
Deidre: But I don’t believe you should pay for a whole life insurance your whole life. The only person that gets rich in that is the whole life insurance agent and the company. I believe for married couples, for single parent, whoever is dependent on that income, you need to protect that income.
Paula: Mm-hmm.
Deidre: So say you [00:04:00] have a four-year-old child at the time. Say you’re a single parent.
Paula: Mm-hmm.
Deidre: You have a four-year-old child. Get a term insurance for 20 or 25 years. That four-year-old in 25 years will be 29. In 20 years, that four-year-old will be 24. Mm-hmm. That adult will not be dependent on your income. They’ll probably be working, in college, and have their own family by that time.
So you only need that insurance for the time you need it, and in that 20 or 25 years that you have term insurance, the money you save, because term insurance is about five times cheaper than whole life, that money you save, just say for a whole life policy you pay 100, for that same period of 20 to 25 years you only pay $20.
Well, that’s $80 you’re saving.
Paula: So true.
Deidre: [00:05:00] What if you invest for the next 20 to 25 years with a rate of return of 6%? You could put that in any investment calculator and it’ll show you what benefit you would get of investing $80 a month at a 6 to 7% rate of return, what you would have in the next 20 to 25 years.
Paula: At compound interest. Yeah.
Deidre: It’d probably be more than that whole life policy was ever for the death benefit.
Paula: Wow.
Deidre: So that’s why I believe in buy term, the money you save, invest the difference.
Paula: Wow, Deidre. This is an eye-opener. You know, most of us don’t think about it that way. We think about, okay, term. Term is going to expire.
We want to make sure that our loved ones are protected, and, you know, we want, you know, because it’s finite, you want to make sure that whenever we [00:06:00] go, our loved ones are protected, you know? So you think, okay, whole life, we are sold it that it’s like an investment, and so you’re investing for a future for yourself because if you don’t use it, you can turn around and get, use that money for yourself. You can borrow against it. Those are some of the things we are told. So educate me and the viewers-
Deidre: So I’m glad you brought that up, Paula.
Paula: Mm-hmm.
Deidre: So that cash value that they tell you that is invested in your insurance policy, think about this. Do you borrow against your car insurance?
Paula: Never heard about that.
Deidre: No. Do you borrow against your health insurance? Mm-mm. Do you borrow money against that? No.
Paula: Mm.
Deidre: What makes you think it’s a good idea to borrow against your life insurance? That’s what we’ve been told. This is supposed to protect you.
Paula: Mm-hmm.
Deidre: You’ve been told something that is untrue.
That cash [00:07:00] value, you’re only gonna get about 1 to 2% rate of return on that money. However, what the insurance companies don’t tell you is that to get that cash value, they said, “Oh, if you need to borrow money, you’ll have this cash value you can borrow against.” How come you have to borrow the money that you put into the policy?
It’s your money. Why do you have to borrow your own money? That’s like me putting $100 in a ATM machine, and then when I want to get it out, only $80 shoot back out, and I’m just like, “Hey, where’s my hundred?” They said, “Oh, didn’t we tell you the rule? You had to borrow from yourself to get that money back.”
Does that make sense?
Paula: Tell me more. I’m all ears. Tell me more. Tell me more.
Deidre: Also, with the cash value, the only way you can get it is to borrow from the company-
Paula: Mm-hmm …
Deidre: or to cancel your policy to get the cash value. [00:08:00] But then you don’t have any life insurance anymore.
Paula: Mm-hmm.
Deidre: So how about doing it different?
Because at the end of the day, one of the rules in that policy is that when you pass away, your beneficiary’s gonna get that death benefit.
Paula: Mm-hmm.
Deidre: However, all the cash value that you have accumulated-
Paula: Mm-hmm …
Deidre: it does not go to your beneficiary.
Paula: So who does it go to?
Deidre: It goes back to the company, back into the insurance company.
It’s written in the policy, but if you don’t know how to read it, you don’t know that it’s there. So if you have a whole life policy, I suggest you let me review it, because there’s five rules in every whole life policy. One is it keeps all your money the first two to five years. So say you’re paying $100 a month.
In year three, you say, “Mr. Company, how much money do I have in my cash value?” And they tell you a big, fat zero. You’ll [00:09:00] be appalled, right?
Paula: Mm-hmm.
Deidre: But that’s what it takes. They tell you, “Oh, it has to build up,” and this and that. No. They’re paying the cash value agent’s commission out of that money. The second rule is that you only get 1 to 4% rate of return, whereas if you had an investment account, you can be getting 6 to 9% rate of return on the, on the money that you invest.
Would you want 1% or 9%? Which one do you want? So the third rule is that if you need the cash value and you request it from your insurance company-
Paula: Mm-hmm …
Deidre: they’re gonna charge you 6 to 8% to borrow that money back.
It’s your money, so why do you have to pay to borrow it? And they’re gonna charge you interest on it. Does that make any sense? The fourth rule is that you need it, it’s an emergency, you [00:10:00] ask the company, “Hey, can I borrow my cash value ’cause I have this emergency?” And they say, “Yes.” It’s July. We can hold that money up until December.
What emergency do you know that will wait six months? So they can hold your money up to six months, unless it’s to pay them premium. It’s written in the contract. The fifth and the worst rule of all is that they keep the return of your money when you die. So Paula, you put this insurance policy in place for your loved one to have it, and when you pass away, they only get the death benefit.
Whatever you had saved up in your cash value, that money goes back to the life insurance company.
Paula: I got it.
Deidre: They don’t explain that to you when they tell you about getting this whole life policy. Thank God we have term insurance. Your money is credited to you immediately. No fee to withdraw your [00:11:00] money because it’s just the death benefit.
What you have is your money in an investment account. You can get that money, withdraw your money in seven days by check, or if you have direct deposit, 24 to 72 hours. And when you die, you have two accounts. You have a death benefit, a life insurance, and you have the investment account. Both accounts have beneficiaries.
So when you pass away, your family get both pots of money. Isn’t that a better deal? And term insurance is five times cheaper than whole life.
Paula: So tell me why they sell us the whole life insurance. I think as I’m asking the question, I think I kind of know the answer. So for the agent, it’s wiser-
Deidre: It’s a bigger commission for the agent.
Paula: That
Deidre: makes sense. And as you continue to pay, they continue to get commissions, so they’ll do whatever to get you to keep that policy. But if you let someone, a expert review your [00:12:00] policy and show you all five of those rules I just went over-
Paula: Mm-hmm …
Deidre: it’s like, do you wanna keep putting money in a pocket with a hole in it?
Or do you wanna do something different?
Paula: Mm-hmm.
Wow. Deidre, this is eye-opening
Deidre: Even when they tell you that you can get paid up insurance, you gotta understand that prepaid insurance is just you paid it ahead of time. You still have to pay the cost for insurance, ’cause every year you get older, the cost of insurance goes up. Doesn’t matter if your premium doesn’t look like it’s going up, but a 20-year-old, by the time you’re 30, your cost of insurance has went up every year.
So it’s more the closer you get to death, the more expensive it is.
Paula: And now is that for whole life or for both term and-
Deidre: That’s for whole life …
Paula: for whole life, okay.
Deidre: And so what happens [00:13:00] is you overpay for basic insurance. So when you’re 20, say they charging you $100, some are going to fees, some are going to the cost of insurance, and some is going to your cash value.
But remember, you have to borrow to get that money back. So say by the time you’re 35, you’re, you’ve built up about 4,000 in your cash value.
Paula: Mm-hmm.
Deidre: But what happens is by the time you’re 55, every time your cost of insurance goes up, they’re using the money from your cash value and putting it to your premium.
So you think, “Oh, my premium hasn’t went up since I was 20 years old.” Yes, it has, but the company is paying it out of your cash value, and you don’t know that’s what’s happening under the hood. So by the time you’re 55 and they start using up all your [00:14:00] cash value, what do you think they’re gonna use to keep that premium going?
They’re gonna start deducting from your death benefit, and they’re gonna borrow from that. And sometimes what happens is that the insurance blanks out and you don’t have any insurance anymore, and you don’t have any cash value. But that company is still charging you, and you don’t even know unless you call the company that you don’t have insurance anymore.
Paula: So the best thing listening to you is, well, there are two things I’m gaining from this. Best thing is do not have whole life insurance, and the second best thing I’m hearing is if you do have whole life insurance, don’t ask the agent any question. Go directly to the company and call them and say, “Okay, so where am I?
What’s my cash value? What’s the cost of insurance? What’s the fee?”
Deidre: And what- I think you should do it with an [00:15:00] expert.
Paula: Mm-hmm.
Deidre: You can be on the line with me or someone like me.
Paula: Mm-hmm.
Deidre: And we call the company. The company has to tell you the truth. The agent will say whatever they need to keep, to make you keep that policy.
Mm. But the company has to tell the truth on those five rules that I went over. They have to tell you. Now, the only time it’s kind of bad is if you’re in bad health and we can’t get you a new policy.
Paula: Mm-hmm.
Deidre: Then you’re kind of stuck with what you have.
Paula: All right.
Deidre: But if you’re young enough or you find this information valuable, have me as a expert review your, do a policy review.
It doesn’t cost anything to review your policy, just to see if you have one of those policies. And if you’re in good health, we can switch you out of that, ’cause like I said, do you wanna keep putting money in a pocket with a hole in it, or do you wanna do something better for your life?
Paula: All right. So another question I have for you, Deidre.
How [00:16:00] old is young enough, or how young is young enough? You said if you’re young enough and you’re in good health, that it can be switched. But what’s the age?
Deidre: The company that I work with, you have to be under 70.
Paula: Under 70.
Deidre: Mm-hmm.
Paula: So that’s the criteria.
Mm-hmm.
Between… Well, you have to be an adult, so over-
Deidre: Adult, 18 to 70
Paula: 18
Deidre: to 70. Mm-hmm.
Paula: Is young enough. Okay. That’s, that’s, ooh. That’s good to know.
Deidre: Sometimes we review policies, and unfortunately, the people are not in health to get new insurance. Mm-hmm. And so they have to go with what they have. Mm-hmm.
Paula: Mm-hmm.
Deidre: But if you are in good health and this information is new to you, you’re hearing it for the first time, I had a policy with a whole life policy, and once I found out all five rules and they showed me in my policy, I was still young enough, I was, I think I was 45, to switch out and get term insurance.
Paula: Mm-hmm. [00:17:00]
Deidre: And I’ve been investing the difference for over 10 years, so I have a nice amount. So my family’s gonna get the death benefit plus the investment accounts that I’ve set up.
Paula: Wow.
Deidre: And that brings me to the rule of 72. That brings me- Have you ever heard of the rule of 72?
Paula: Never heard of it. Tell me what that is, because we spoke offline about that.
Okay.
Deidre: So the rule of 72 was really made famous by the mathematician Albert Einstein. Mm-hmm. Another word for it would be compound interest.
Paula: Oh, huh.
Deidre: And you just take whatever interest rate you’re getting and divide it by 72. So say you’re putting your money in a investment account that’s giving you 8%.
You divide eight into 72, and that’s nine. So if you had $1,000 in that account, it would take nine years for that $1,000 to [00:18:00] double to 2,000. How long it takes your investment to double. So if you’re getting 3%, you divide three into 72. If you had $1,000 in there, it would take 24 years for that 1,000 to double.
But the good thing is that it double. That is what the rule of 72 is compound interest. That’s something that little kids should know. If I give you $5 allowance, you should put it in a account that’s gonna double, and then your $5 will now be $10. So you teach your kids early about compound interest and the rule of 72
Paula: So wow. The takeaways. All right, Deidre, so-
Deidre: Yeah, it’s very important. I learnt this at 45
Paula: That was about a long ago
Deidre: But what’s good is that I have young kids and [00:19:00] I had grandkids that I’m teaching. My grandson is 19. He’s already investing in a Roth IRA ’cause he understands the rule of compound interest, the rule of 72.
By the time he’s 40, financially he’s gonna be good. Better than good. Better than his friends who are not investing, ’cause the earlier you invest, the more compounding periods you have.
Paula: Of course. Of course. Wow. So we talked about the Roth IRA. Do you have any time to talk a little bit to educate us on that, or that’s for another-
Deidre: A lot of people don’t get what a Roth IRA is.
It’s for middle class America. And so everybody knows about a traditional-
Paula: Yes …
Deidre: and that is pre-tax money. So a lot of 401s, TSPs, retirement accounts, they put your money away pre-tax. [00:20:00] So whenever you retire, say at 65, 62, that money is gonna be taxed by Uncle Sam So you should have diversification in your investments.
So you should have some pre-tax dollars, which is a traditional, but you also should have a Roth IRA. That money is taken out of your paycheck. That money has already been taxed. Mm-hmm. So that Roth IRA, as it grows, all that interest comes to you. So when you get ready to retire, Uncle Sam, he cannot tax you twice.
That money, it’s already been taxed, so when you get your Roth IRA and you pull that money, that money has already been taxed, so you don’t get taxed again. So now you have diversification. You have pre-tax dollars, traditional, and you have Roth [00:21:00] IRA after-tax dollars. That’s what you need in retirement to protect your retirement income.
Also, it would be good if you’re over 55 to get annuities, just a lot of things, because experts say you should have seven to 10 multiple streams of income in your retirement.
Paula: That was the next thing I wanted you to talk about, annuities. We hear about annuities, and we’re not too clear on that. There are fixed annuities.
There are variable annuities. It can get quite confusing.
Deidre: It can. I
Paula: think, I think we have a few minutes. That- Do you have a few minutes?
Deidre: So, so what I would say is that annuities are based on who’s getting it, your particular situation.
Paula: Mm-hmm.
Deidre: A lot of times you can’t use all your retirement money in annuities.
They won’t let that happen. Mm-hmm. You have to still have disposable income.
Paula: Mm-hmm.
Deidre: The less you can put in an annuity is [00:22:00] 25,000, but you have to have other income before they would let you have an annuity. So if all you had was 25,000, they would not let you put all that money in an annuity. But it’s more individual about fixed, index, variable annuities, but that would be a more investment appointment that you would…
I would have to look at all your documents and stuff that you have to see what would be best for you. But annuities, that’s something that’s, that I’m an expert on that as well. And so it’s just getting a roadmap so that when you’re at retirement age, you don’t have to go work at Walmart because you ran out of money.
Paula: That’s
Deidre: true. And that’s when you see the older people at McDonald’s, Walmart. It’s not that they didn’t work hard. It’s not, it’s just they weren’t [00:23:00] informed. Nobody sat down and gave them a roadmap to how they should. And I also provide a financial needs analysis, which would be a roadmap and it would give you your FIN number.
That’s your financial independence number. Okay. So Paula, if I asked you, I told you I had a million dollars for you-
Paula: Mm-hmm …
Deidre: but you have to come to my house and get it, but I never told you where I live, how long would it take for you to get there?
Paula: I wouldn’t get there, because I don’t know where you live.
Deidre: Right. Forever.
Paula: Yeah.
Deidre: So if you don’t have a FIN number to reach for, you don’t know what your financial independence number, or you never heard of that before, then you need to sit down and talk to an expert about that, so that if you know what your goal is, we can set up a financial game plan to get there.
Paula: These are things, ladies, that we, many of us don’t know about it, and the [00:24:00] earlier we know, the easier it is to plan for retirement or to plan, you know, because one thing we know is that we are gonna… Well, we’re gonna die. Right. But before we die, we are getting older every single day. So not to know is like burying your head in the sand and saying, “Oh, it’s not gonna happen to me,” or, “My son or my daughter will help me out.”
No. You know, it’s best to know and then know what not to do than to not know and you don’t even know what to do. So-
Deidre: Correct …
Paula: these are, that’s the reason that I’m glad-
Deidre: One more little point I wanted to add.
Paula: Mm-hmm, go ahead.
Deidre: Please, please, do not get your financial information from TikTok.
Paula: Or, from?
Deidre: Uh.
Paula: Any of the other-
Deidre: A lot of people or some of these other…
A lot of times, make sure the person is licensed.
Paula: Yes.
Deidre: They have their Series 6, 63. They have their investment license. A lot of people are on [00:25:00] these websites telling you to do this and do that, and they don’t bit more have a license. So get your financial information from a licensed professional. That is my takeaway for today.
Paula: Okay.
Deidre: They wanna tell you about generational wealth, but they don’t even have a license. So stay clear of just, whatever you hear on TikTok, that’s the end thing to do. No, talk to a professional licensed investment advisor.
Paula: Thank you so much. You gave us some extra minutes. For whoever now who’s listening in, and of course, those who are in the audience and are taking notes, if they need to get in touch with you, Deidre, how can they find you?
Deidre: They can call me.
Paula: Okay. I’ll drop your information but you speak it out, and I’ll drop it …
Deidre: you can call me. I have a website. Mm-hmm. It’s financialsolutionsbydk.com.
Paula: Love it.
Deidre: You can set appointments. I have information on that [00:26:00] website. Mm. You can reach me on Instagram.
Paula: Mm-hmm.
Deidre: And Paula’s gonna drop the information.
Paula: Yes.
Deidre: And, Yeah, let them- … I’m free to talk and set up appointments with you so that you can maneuver through this financial blueprint that, you know, it’s laid out for us. You just need someone to help you .
Paula: Yes. Thank you so much. As she said, what you don’t know that you don’t know can really hurt you.
Right You know? And for those of you who would like to be a guest like the phenomenal Deidre Knighten, reach out to me on my website, which is chattingwiththeexperts.com. I’m also on LinkedIn. My business page there is chattingwiththeexperts.com. Uh, chattingwiththeexperts.com. That’s my that’s my website.
I’m also on Instagram, and my handle there is chat_experts_podcast. And, we have a YouTube channel. We’d love for [00:27:00] you to subscribe there. You will, of course, be able to listen to and view Deidre’s episode there once it’s out. And, we are now gonna open up the floor to all of you who joined us so that the questions that I haven’t asked her, which are so many, there are so many questions here I have that I haven’t had a chance to ask her because of time.
This will give you an opportunity to speak with her one-on-one and get to know more of these very valuable information, these things that we need to know, that we have been scared, some of us are scared to ask these questions because we don’t wanna- Right … we don’t wanna seem like, you know, silly or uneducated.
But there’s no foolish or there’s no silly answer. We need to know these things. So thank you again, Deidre, for taking the time to meet with me and to share your knowledge with those who have joined us. And, now we’re gonna open up the floor to everyone. Thank you.
Deidre: Thank you so much, Paula. I’m ready for the questions.[00:28:00]
Paula: It’s my pleasure.