Whole Life Insurance's Guaranteed Column Explained - YouTube

Today we're going to talk about whole life guaranteed growth,

which is probably

one of the most attractive aspects of a whole life policy especially to newcomers.

It's probably one of the most misunderstood elements of the whole life policy as well.

I wrote a very extensive article on whole life guaranteed growth

and four ways to accelerate it.

You can get the link to my Whole Life's Guaranteed Growth article here

and I'm going to show one schematic on there

and it has to do

with what I see right here.

So probably the coolest thing about whole life guarantee growth

is whatever the base policy death

benefit is,

your cash value has to equal the death benefit as

soon as you die or whether you reach age 120

(whichever comes first).

Now most of you are not gonna make it to 120.

Some of your kids will.

But the important thing is if we look at the guaranteed trajectory

that all of these policies have,

it's a contract it's in the policy that

if you pay these premiums you can see the cash value in blue here approaches

the top end of the basic death benefits

and actually equals it way out here at age 120.

Now notice that life expectancy here somewhere in

this area you've actually gotten the bulk of your guaranteed growth.

So that's very very appealing because I know most of you are

concerned about whole life not so much for the guaranteed death benefit,

but because of the cash value

and using that for retirement or having that safely

on hand for liquidity or whatever that is.

But just knowing that at the very worst case scenario of no

dividends are ever paid if dividend rates don't go back up it

doesn't rely on any of that. The basic cash value has to equal the

death benefit.

Now this is especially appealing when

you consider that paid up additions.

Hopefully you've read about paid up additions.

If not you can,

check out this article below it's /PUA - when

you buy paid up additions either through dividend

payments (like you roll your dividends back in the policy)

or you make extra PUA payments over

and above the base premium, which most you were doing by adding term riders.

When you buy these paid up additions,

not only does it increase your base cash value

but I just took this little schematic

and I stacked the extra death benefit on top.

And that's actually what happens.

You can read about this here at our PUA article

but think about it - since your basic cash value

has to equal the death benefit,

if you raise the amount of the death benefit well then aren't

you also raising the trajectory

of your cash value growth?

And that's what I show here.

This is not a scale model. Don't hold me to this,

but you get the point.

I want to actually look at some carriers,

they all design how their guaranteed growth works

and how much of the total return is

dependent on dividends. And I think this is where the biggest myth comes in

and I think some of you need to be cognizant of it when you're

looking at illustrations.

Not that you're ever going to have to worry about just

getting the guaranteed cash value because all these companies well not

all of them but most of them have paid a dividend each

and every year for the last hundred plus years.

Some of them like the ones we use a hundred fifty one hundred

and sixty plus years.

But the reason is, you want to see how

efficient the guaranteed structure is.

So if we look at the guaranteed cash value in all these examples we're looking at we

just show the initial premium of ten thousand

and that's using a

term rider and doing max PUAs in

for a male age forty five second best rating.

That is an important your numbers are going to differ.

But I want you to see the ratio of the total return the non guaranteed side

with the guaranteed side.

And so this particular carrier I'm not going to mention

any names but they have the one of the strongest guaranteed policies.

So if you can see here you put ten

thousand dollars a year for 10 years. And even if you never got any dividends even if dividend

rates didn't go up, you've got one hundred four thousand dollars not

to mention your death benefit has gone up from 214 to 381 as you

can see right here.

Now if we look at the non guaranteed side we

can see it's not that much different. We only get to 108.

And in fact if we look at year 5,

there's forty seven thousand

and eighteen bucks here and there's

only forty seven thousand five hundred thirty nine dollars.

And if we look at this annual dividend column you

can see that this company especially in today's dividend rates isn't

paying very robust dividends.

In fact you see the first year is nineteen dollars

so there

are certainly other companies that do things a little bit differently. So here's a different one.

We can see the guarantees are very comparable here 104

but instead of 108 total cash value

with the current dividends we see 110,

and you can see in the annual dividend column how there

is more dividends being paid but this chassis

too is not very dependent on annual dividends,

which sounds great from a sales standpoint if somebody says look

almost all of this is guaranteed.

Well that's great. In a low interest rate environment like we're in now.

But what happens when dividend rates go up?

So if the total return is largely just

based on the guaranteed cash value. Well then

you're pretty much guaranteed not to get much of an increase when interest

rates go up and dividend rates go up.

If you haven't seen it already I'm just going to digress for a moment.

The video we have here "A Historic Whole Life Policy",

so you can get there through the link below

but it actually shows this it shows a policy that

was illustrated in a much lower dividend

rate environment, then dividend rate spikes

and then they went down and even went down lower to what they were illustrated at.

And even still this policy greatly outperformed because

of those spike years.

So you want to have a policy that's

dependent on dividends, you want to have a nice blend of guaranteed cash value

growth but also current dividends.

So we're going to look at some more of that.

You know you can see you get to 110

and they don't even have a strong of guarantee

performance but at least that means that the dividends will

vary. You're more likely to get a better total return here

when dividends start to go up,

when interest rates go up and dividend rates also go up.

Here we have 102 to 110.

Right so you can kind of see some different ratios.

Here's one of our favorite carriers.

This just shows the guaranteed.

And this is the same ten thousand for the forty

five year old after 10 years. A hundred thousand so only one hundred thousand

guaranteed. But notice instead of the one waits

and the 110 we get to 115?

That's Because more

of the return is coming from dividends - you're getting

more bang for your buck for those dividends and you're still getting a decent guaranteed

amount.

Again this company paid a dividend every year for the last hundred

and fifty plus years.

This company here, they have a collapsed on

the same page here the guaranteed assumptions get all the way to

102 almost to 103.

And notice that the total return

with dividends are all the way up to 121.

This is a big deal and this is one

of our favorite carriers right now because they have a very nice blend

of a very strong guaranteed chassis

but also very strong dividends

but an also PUAs so their

PUAs give you actually more death benefits for

your buck, which as we talked about in a guaranteed

growth that

raises the bar that the cash value has to meet.

So as you stack these PUAs on,

as we see here,

every year you stack these PUAs on

it's raising the bar for the total guaranteed cash value to

grow towards it.

So hopefully this helps,

you really should be exploring many different policies not

just looking at one illustration but looking at several

and finding a group that can help you do

the shopping for you and help you point to these little subtleties,

these little idiosyncrasies amongst the different carriers

and products out there can

really help you focus on what you need to get what you're looking for,

which is maximum cash value growth

and really the best bang for your buck on all fronts - cash value,

death benefit, dividends,

PUAs and so forth.

Hopefully this helps, feel free to reach out

and schedule a time

with our team and we can go over these numbers

with you using your specific specs

and you can see what works best for you. Talk to you soon.