7702 Whole Life Insurance Updates

7702 Whole Life Insurance Updates

Are you considering whole life insurance, but want to know more about the new products the life insurance companies have released in response to the 7702 Whole Life Insurance updates in 2021? 

The new products are here. What does the 7702 tax code mean for whole life insurance?

Tune in now to get the need-to-know information so you can see what to expect for new Infinite Banking policies.

What are the 7702 Whole Life Insurance Updates?

If you’re scratching your head when you hear 7702, don’t worry. This simply refers to a section in the IRS tax law that dictates the tax treatment of whole life insurance. At the end of 2020, this tax law was updated. 

While some have voiced concerns over how this will affect future life insurance policies, we’re more optimistic. You can read our initial analysis of the 7702 whole life insurance updates in our post, Is Infinite Banking Dead?

Fortunately, we’re now seeing actual life insurance illustrations that reflect these changes. That means we can dive deeper into the discussion with real numbers so that you can make the most informed decisions possible about your insurance.

What Happens to the Infinite Banking Strategy?

While there’s still a lot of unknowns, we’re starting to see new developments in the 7702 change. These updated products and policies will take full effect by January 1, 2022. Not all major life insurance companies have begun to sell these new policies. 

From our preliminary analysis of what’s available right now, here’s what we know:

  • Guarantees have gone from 4% to somewhere in the 2-3% range on most products
  • You’ll see less total death benefit compared to older policies of the same premium
  • Total dividends, which include guaranteed and non-guaranteed, should not be impacted much

Are Lower Guarantees a Bad Thing?

Not necessarily. In fact, as we mentioned in our first 7702 whole life insurance updates article, lowering the guarantees can actually strengthen your company’s longevity. Remember that minimum guarantees are just that: minimums. As a policy owner, you get to partake in the company’s profits. This means that if and when interest rates bounce back, we would expect to start seeing higher returns on the non-guaranteed side. 

We should also note that the guaranteed portion of your policy is a part of the declared dividend. For example, if the guaranteed side is 4%, and the declared dividend rate is 5%, you’re (roughly) getting an additional 1% in growth. However, there are certain factors that change exactly how this calculation works. 

Ultimately, remember that an illustration of a policy is simply a snapshot in time. As soon as companies pay dividends, that illustration is inaccurate. So a policy illustrated in a low-dividend year won’t reflect the real trajectory of your policy. It’s simply a guideline. 

We discuss this further in 7702 Whole Life Insurance Dividends Update (2021) Part 2.

Is Less Death Benefit Bad?

While total death benefit is going to be lower overall, this actually pushes the cash value up. This happens because your cash value is the portion of the death benefit that’s accessible to you. And by the endowment age, your full death benefit is accessible to you. As your policy matures, the death benefit increases, and your accessible cash value increases. 

With a lower death benefit, this means that your cash value is proportionately higher than a similar policy. 

While you may be losing some death benefit, what you’re not losing is cash value and the ability to access that cash in a tax-advantaged way. To solve for the death benefit, you can consider a convertible term insurance policy or put more premium into your policy. 

Is There a Big Difference Before and After?

Truth be told, we’re not seeing much change between older and newer policies in terms of projected rates. As we alluded to, this is because while the composition of guaranteed to non-guaranteed is changing, the actual projection is not. 

Considering this, we believe that the non-guaranteed portion of the dividend is going to make up for any lack of guaranteed growth. This still remains to be proven, however, mutual insurance companies manage their money very conservatively to take care of their contractual obligations. We don’t see the 7702 whole life insurance updates as something negative, rather it’s a tool, and one that may even prove to be beneficial for your overall IBC strategy.

Book A Strategy Call

Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help!  Book an Introductory Call with our team today https://themoneyadvantage.com/calendar/, and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.

Rachel Marshall

Rachel Marshall is a devoted wife and nurturing mother to three wonderful children. Rachel is a speaker, coach, and the author of Seven Generations Legacy™, passionate about helping enterprising families unlock their true potential and live into the multi-generational legacy they are destined for. After a near-death experience, she developed a deep understanding of the significance of recognizing and embracing one's unique legacy As Co-Founder and Chief Financial Educator of The Money Advantage, Rachel Marshall is renowned for her ability to make money simple, fun, and doable. She empowers her clients to build sustainable multi-generational wealth and create a legacy that extends far beyond mere financial success. Rachel's expertise lies in helping wealth creators remove the fear of money ruining their children, give instructions for stewarding family money, teach financial stewardship and create perpetual wealth through family banking, and save time coordinating family finances. Rachel co-hosts The Money Advantage podcast, a highly popular show that delves into business and personal finance, including how to effectively manage finances, protect wealth, and generate sustainable cash flow. Rachel's engaging teaching style and practical advice have made her a trusted source of financial wisdom for her listeners.
Perpetual Wealth

Becoming Your Own Banker, Part 23: Practical Wisdom for Perpetual Wealth

By Rachel Marshall | February 12, 2024

Do you want perpetual wealth that continues growing in future generations? Today, we’re continuing this power-packed series through Nelson Nash’s famed book, Becoming Your Own Banker, as we discuss the benefits of buying life insurance for your grandchildren. So if you want to see how thinking generationally is a long-term target on wealth that gives…

Read More
Higher Rate of Return

Becoming Your Own Banker, Part 22: Get a Higher Rate of Return

By Rachel Marshall | February 3, 2024

Are you looking for a higher rate of return? If so, your quest may point you to an important secret as you make financial decisions. Most people want to get the highest rate of return on their investment dollars …. which is why whole life insurance can be such a turn-off.  It seems like a…

Read More