1. BUY TERM & INVEST THE DIFFERENCE COMPARISON
BTID
BUY TERM & INVEST THE DIFFERENCE COMPARISON
FOR ADVISOR USE ONLY

2. BTID…A History Lesson Who was the Pioneer of BTID? A.L. Williams
Can anyone in here tell me who was the Pioneer of BTID? Most think Dave Ramsey, some say Suze Orman as we love to speak to his logic and how to overcome it but the real answer is a man by the name of A.L. Williams.
A.L. Williams

3. BTID…A History Lesson
According to Professor Dan McGill, the BTID concept has been around as early as He says, “there are certain insurance ‘consultants’ who, when they find permanent plans in an insurance program, will advise their surrender for cash and replacement with term insurance.”
The best way to start this discussion is to provide a history lesson as it relates to the origins of BTID as it gives us great insight into the thought process of those who strongly believe in it.
According to Professor Dan McGill, the BTID concept has been around since roughly He says, “there are certain insurance ‘consultants’ who, when they find permanent plans in an insurance program, will advise their surrender for cash and replacement with term insurance.”

4. BTID…A History lesson A.L. Williams….High School Gym Coach
In 1965, Williams' father suddenly died of a heart attack. He had a whole life insurance policy that left their family underinsured.
In 1970, A.L. Williams' cousin introduced to him the concept of term life insurance. Williams was taken aback by the idea of not knowing that there was a choice when buying life insurance. Believing that families were paying too much for whole life policies that left them poor in the wallet and deeply underinsured, Williams joined his cousin at ITT Financial Services in 1970.
In June 1973, six months before ITT went out of business, he left and went on board with Waddell & Reed, another BTID company that saw early success.
On February 10, 1977 Williams and 85 associates founded their own company A.L. Williams & Associates on a simple philosophy: "Buy Term and Invest the Difference.” that later became Primerica.
So who is A.L. Williams? Here is some background:
A.L. Williams….High School Gym Coach…and you know what Dewey Finn from School of Rock had to say about Gym Coaches right (insert pic)?
In 1965, Williams' father suddenly died of a heart attack. He had a whole life insurance policy that left their family underinsured.
In 1970, A.L. Williams' cousin introduced to him the concept of term life insurance. Williams was taken aback by the idea of not knowing that there was a choice when buying life insurance. Believing that families were paying too much for whole life policies that left them poor in the wallet and deeply underinsured, Williams joined his cousin at ITT Financial Services in 1970.
In June 1973, six months before ITT went out of business, he left and went on board with Waddell & Reed, another BTID company that saw early success.
On February 10, 1977 Williams and 85 associates founded their own company A.L. Williams & Associates on a simple philosophy: "Buy Term and Invest the Difference.” that later became Primerica.

5. BTID…A History lesson A.L Williams Founds Primerica
SO what made BTID so popular during this time frame that saw A.L. Williams’ star rise? The answer can simply be found in our country’s interest rate history. At the time A.L. Williams founded what would become Primerica interest rates were around 5% and climbed dramatically from there. The idea of buying term and investing the difference made a ton of sense when you could invest in guaranteed vehicles offering well in excess of 10%! The problem is the idea is only sustainable with higher interest rates and we don’t have to look any further than where we are today to see that. In order for BTID to work right now you need returns and the only way to get those needed is through the market which means taking on significant volatility.

6. BTID…A History lesson At the root of BTID is the idea that:
Permanent insurance overcharges the policy owner
WL policies are illiquid
That accumulation and protection elements should be separated
When we look at the root of the BTID concept though here are sort of the key points if you will:
Permanent insurance overcharges the policy owner
WL policies are illiquid
That accumulation and protection elements should be separated
Let’s take a look at each of these one by one.

7. BTID… Does permanent insurance overcharge the policy owner?
$500,000 Coverage
Whole Life Insurance is Illustrated
$3,5000
Age 70
LT-20 Whole Life
Total Prem. $367,380 $163,214
Cash Value $0 $252,355
Paid Up Insurance $0 $431,000
$3,198.91
2,100
Prof. Dan McGill – “Buy Term and Invest the Difference Revisited”
“As a result, each dollar of protection on the term basis tends to cost middle-aged or older policy owners more than under any other type of contract.”
1,500
Premium
900
Let’s start by answering the question on whether permanent insurance, specifically whole life, does in fact overcharge the policy owner? Well that really depends on one’s perspective. Does it cost more for a given DB TODAY? SURE! In fact for $500k in coverage on a 30 Year Old Male one would pay $ per month for Whole Life coverage vs only $41.04 per month for a 20 Year Level Term. If this is all we focus on then of course the obvious answer is to buy the term. But when it comes to life insurance, we want the coverage to last over time and therefore must pay premiums over time not just today. The reason I mention this is because when our 20 Year Level Period is up on the term the client must choose…do I let the term lapse (leaving one potentially under insured) or do I renew? At this point the term becomes an ART and as you can see can get very expensive very fast.
In fact, when we look at the cumulative premiums paid and benefits by Age 70 there is no doubt to which policy better served the client. “Overcharging” is in the eye of the beholder and it is your job to make sure clients realize the long term cost and affects of both types of insurance.
One last thing…no one chooses ART BUT in order to get a new level term period or even permanent coverage one would be doing so at Age 50 premiums which would still see a drastic rise.
$340.03
300
$41.04
Age
As of January 4, Male age 30, nonsmoker. Premiums represent two specific policies and may not be representative of all insurance companies. Source: American General for 20-year level term and Transamerica Premier for whole life. This presentation does not reflect the fact that, because of interest and inflation, the future value of a dollar may be less than its present value. Rates subject to change.

8. BTID… Are Whole Life policies illiquid? No Why Not?:
Non-Forfeiture Options
Guaranteed Cash Value (lump sum or partial through loans)
Reduced Paid-Up
Extended Term Insurance
To further our point, one is only overcharged is there is not actual value for the price one pays. More expensive does not mean “overcharged” but again you have to show the clients why the Whole Life costs more and it is because of the value it offers! Show them the GVC calculator and preach to them the value of having not only a Guaranteed , Permanent Death Benefit but to Guaranteed Cash Values & Non-Forfeiture options…

9. BTID… Limitations to this Program…
BTID marketers believe the can devise a plan to “unbundle” whole life insurance into its components, term life and an investment program.
Limitations to this Program…
Behavioral – Middle- and lower-income brackets
Mental Accounting
Policy Persistency
What happens when you have a disability?
Market/Interest Rate Driven
Today’s Interest Rates
USA Today – Retirement: A third have less than $1,000 put away
36% of workers have less than $1,000 in savings and investments for retirement
60% of workers have less than $25,000
Only 44% have tried to calculate how much they need for retirement
Now then, BTID folks will try and argue that by unbundling insurance and investments if you will that you won’t have a need for insurance at all beyond the term period (cornerstone of Dave Ramsey thinking). The problem with this line of thinking is that limitations exist:
Behavioral – Middle- and lower-income brackets
Mental Accounting
Policy Persistency
What happens when you have a disability?
Market/Interest Rate Driven
Prof. Dan McGill – “Buy Term and Invest the Difference Revisited”
“The average annual lapse rate of about 3 percent on traditional whole life policies is less than half that of term life (6.9 percent) over the policies’ durations.”

10. BTID… Should accumulation and protection elements be kept separate?
Not necessarily…
Why Not?
Whole Life Insurance is Life Insurance, not your retirement vehicle
The savings inside life insurance provides non-forfeiture options for life’s “what-ifs” which no other insurance product can provide
The Death Benefit and Cash Value growth are guaranteed and the whole life policy will still provide more death benefit to your beneficiaries when your term policy expires
Michael Smith – Professor of Insurance & Finance at Ohio State University
“[Whole Life] is a package of options that is not precisely duplicated by any other combination of commonly available financial contracts.”
Now let’s look at the second point regarding the belief that accumulation and protection elements should be kept separate. Should they be? Not necessarily…Why Not?
Whole Life Insurance is Life Insurance, not your retirement vehicle
The savings inside life insurance provides non-forfeiture options for life’s “what-ifs” which no other insurance product can provide
The Death Benefit and Cash Value growth are guaranteed and the whole life policy will still provide more death benefit to your beneficiaries when your term policy expires
In fact, Michael Smith, a professor of Insurance & Finance at Ohio State University said it best when he said, “[Whole Life] is a package of options that is not precisely duplicated by any other combination of commonly available financial contracts.”

11. Whole Life…a Savings & Protection Vehicle
“Ray Kroc opened his first McDonald’s in Des Plaines, Ill. In 1955 and bought out the McDonald brothers in 1961.
Kroc did not take a salary during his first 8 years, and to overcome constant cash-flow problems, Kroc borrowed money from two cash value life insurance policies (and also his bank) to help cover the salaries of key employees. He also used some of the money to create an advertising campaign around emerging mascot Ronald McDonald.”
“In December of 1952, Walt Disney was determined to implement his dream of a new business. His brother, Roy, thought Walt’s idea would fail. Roy would have no part of Walt’s dream. The Disney bankers sided with the smarter brother, Roy. Walt couldn’t get a bank loan for his new venture. Reflecting back on this time period, Walt later said, “I couldn’t ever see that there was any better place to put money than in the thing I was interested in.”10
So Walt “cleaned out his small savings accounts. He borrowed $100,000 against his life insurance. He sold his vacation home in Palm Springs. He persuaded dozens of employees to loan him money.”11
This made his wife, Lilly, very nervous. But this is how Disneyland was originally funded. Walt was the only stockholder.
So what was the rate-of-return on Walt’s whole life insurance policy?
The productivity of Walt’s life insurance policy was not determined by a ledger of projected numbers, but rather by what Walt Disney did with his accumulated capital. He saw his life insurance cash value as a resource.”
From the days of Elizur Wright to the early 1970’s, Whole Life Insurance WAS life insurance…an undisputed savings & protection vehicle. It STILL IS a source of funds of last resort.
No let’s look at Whole Life for what it is…it is not an investment vehicle but a savings & more importantly protection vehicle. While the main goal is to provide spousal protection against death the reality is Whole Life can be a source of funds of last resort if you will. Anybody remember “It’s a Wonderful Life?”
Now the problem with this example is that it is fiction. Therefore let’s take a look at 2 real life examples that involved two of the most well known brands in the entire world!
Read off Disney & McDonalds examples…

12. 31 Year Old Male (Age nearest 32) $250k Life Insurance Need
Whole life or term?…
The Client
31 Year Old Male (Age nearest 32)
$250k Life Insurance Need
I have a question for you. Wouldn’t it be nice to be able to have this BTID conversation on the fly, and in person, without needing these slides. Besides, let’s be honest, not everyone of your clients is going to be 30 years old and need $200k in insurance.
As a result, I’d like to take this opportunity to show you a way you can have the BTID conversation on the fly, whether it be at a Starbucks or a restaurant. Let’s say the client is 31 years old today but is age nearest 32 and has a DB need of $250k.
A 20 YT policy with ANICO, our newest insurance carrier, would cost $25.92 per month and the client is interested in that option because of their ABRs.
On the other hand, a WL policy with TP would cost us $ per month.

13. Whole life or term?…
If you’re taking notes, after this presentation I want you to go to your app store on your phone and look up “EZ Calculators.” You’ll see an app for “EZ Financial Calculators” by Bishinew Incorporated. You may then download this app to your phone and if you have any questions then you can ask Bryan or I after today’s presentation to walk you through this app 1-on-1.

14. Whole life or term?…
Remember, the discussion here is if your client should BTID or purchase one of the WL policies FC offers. The purpose of BTID is that we will be self-insured at some point in the future which, in our case, is 20 years from now. So, if they are adamant about buying term and investing the difference then this is where we use their words against them.
You’d simply open your TVM calculator and enter the following inputs:
Present Value - $0.00
Future Value - $250,000 – This is the future DB
Annual Rate- This is where we get their input. Simply ask your client what a reasonable rate of return is. From what I’ve found, the most common answer is 6% here so I’m going to plug in 6%.
Periods – 240 (12 months * 20 years)
You will then hit the PMT, or payment, button to get how much your client would need to put away to BTID. This comes out to $ per month.
From here, we ask the client if they are ready to put away this amount today, on a monthly basis, for the next 20 years. You would then pull out your AMS account application form, ready for them to fill it out. Please remember that you’d still need to purchase a 20YT policy which would cost us $ In total then, your clients would need to be prepared to put $ towards their BTID idea, or, purchase the WL you recommended at $ per month.
The interesting thing here is that if we invested the delta between the $ and the $ per month, at that same 6%, we’d have over $178k in our investment account. If you combine that with the future RPU of $143k from the WL, then we are well over our $250k.