馃攳
Funding A Policy With A Lump Sum - 60 YR Old Male | IBC Global, Inc - YouTube
Channel: Insurance Business Concepts (IBC) Global
[5]
so we are going to take a look at a lump sum聽
study we're going to look at an individual聽聽
[10]
with a lump sum of money that wants to get it聽
into a high cash value life insurance policy but聽聽
[16]
they don't like the idea of payment it's more聽
so hey what's the most efficient manner I can聽聽
[20]
get it into a life insurance policy and maximize聽
my cash value that's the name of the game that's聽聽
[26]
their main goal so when we have a cash value life聽
insurance policy or I should say let me back up聽聽
[32]
for this case study what we're going to look聽
at with a cash value life insurance policy聽聽
[36]
is a 60 year old male so we're going聽
to look at someone a little bit older聽聽
[40]
with a lump sum of cash to see how can he optimize聽
the cash value at the end of the day we're going聽聽
[47]
to assume a lump sum of three hundred thousand聽
dollars goal again is to maximize cash value and聽聽
[54]
the company slash policy dividend rate the聽
gross crediting rate is about six percent聽聽
[60]
with this particular sample so the question is and聽
this often comes up as hey if I have a lump sum of聽聽
[66]
money say it's 300,000 and the insurance company聽
is paying a dividend rate presently of six percent聽聽
[74]
maybe it's just the guaranteed rate of four聽
percent doesn't it make sense for me just to聽聽
[79]
give you all the money up front so the money can聽
begin to compound right away does that make sense聽聽
[86]
is it possible well the question is can I do it聽
that's the question we'll often get and the answer聽聽
[93]
is yes but it won't be that attractive meaning a聽
one-time payment if I just take that three hundred聽聽
[102]
thousand dollars and put it into a policy in one聽
shot we're going to assume a non-MEC here because聽聽
[107]
we want to keep the tax benefits alive within the聽
life insurance policy with a non-MEC it won't be聽聽
[113]
that attractive so as we look at the mechanics聽
here main goal is efficiency how do I get聽聽
[120]
the most juice out of the money that I pay into a聽
policy I want to optimize the cash value first and聽聽
[126]
foremost spreading it out over a number of years聽
with a life insurance policy will actually make聽聽
[132]
more sense and we're going to break it down and聽
go into detail here what we're going to look at is聽聽
[137]
an example of taking that 300,000 and funding it聽
over one three and five years so you'll see 300k聽聽
[146]
100k for three years and then 60k for five years聽
same total of of 300 grand at the end of the day聽聽
[155]
and the goal here is again make it as efficient聽
as possible and also a non-MEC so obviously for a聽聽
[165]
single pay we could look at a single premium life聽
insurance policy which would be a MEC that would聽聽
[171]
look good but we've got the MEC status and it聽
kind of ruins everything so what we've got up here聽聽
[177]
is an example of a policy of our 60 year old聽
male on the left we see a policy of a one聽聽
[188]
with a one-time payment three hundred thousand聽
dollars center hundred thousand for three years聽聽
[194]
far right 60k for five years total of 300k in聽
all of these examples so 300 1 times 3 60 times 5聽聽
[203]
okay now what I will note here before we get into聽
the mechanics or start breaking down the columns聽聽
[210]
let's do it this way look at the death benefits聽
they are a little bit oddball figures right you've聽聽
[217]
got 4 million 280,000 1 million 426,000 and then聽
856,000 so this is a little bit of my OCD coming聽聽
[226]
into play when we design these policies聽
which I do quite a bit but what I was aiming for聽聽
[234]
just for pure apples to apples comparison same聽
company same health rating all that good stuff
[242]
were clean MEC limits so 4.28聽
million MEC limit was exactly 300,000
[253]
1.426 million MEC limit was a clean 100,000聽
and an 856 MEC limit for the same 60 year old聽聽
[261]
male was a clean sixty thousand dollars so what聽
we're doing in this particular example is funding聽聽
[267]
up to the MEC line not going over because we want to keep the tax benefits聽聽
[272]
that cash value life insurance carries now these聽
colors red we've got a description here represents聽聽
[282]
the base premium still due but the policyholder聽
not paying it so the policy has to pay for the聽聽
[288]
premium meaning let me back up if the premiums聽
still do and I'm not paying it out of pocket聽聽
[293]
it has to come from somewhere policy can borrow聽
from itself or if there are enough dividends and聽聽
[299]
interest to cover it the policy can pay for itself聽
through surrendering a portion of the dividends in聽聽
[305]
interest so red will represent the policy paying聽
for itself yellow represents the breakeven point聽聽
[312]
and then light pink represents policy with the聽
strongest cash value over time meaning which聽聽
[321]
option gives me optimum cash because that's what聽
we're looking for efficiency so let's begin on the聽聽
[329]
left a one-time payment of 300 tag these are all聽
optimized with this insurance company that 10/90聽聽
[336]
split 10 premium 90 PUA optimize the upfront cash聽
in long term especially on the guarantees via long聽聽
[344]
term so strongest cash compared to the other聽
examples in years one and two because he got聽聽
[353]
the most money in one shot 30k base premium聽
300k out of pocket now here's the interesting聽聽
[361]
piece beginning year two he pays nothing in聽
red is the 30,000 base premium that's still due聽聽
[370]
but he's not paying it so what's happening is聽
the dividends and the guaranteed interest portion聽聽
[376]
is supporting that premium on its own it's all聽
internal now we've got a turn rider associated聽聽
[382]
with this as well so what's happening here cash聽
kind of stays the same and then starts to go down
[391]
until year eight where we were able to cut聽
the term rider and we made another move with聽聽
[396]
the policy two which reduced the death benefit and聽
then the cash begins to increase however with that聽聽
[403]
said look at this between years 11 and 12 when聽
the policy finally breaks even that means you聽聽
[412]
paid in 300,000 as a 60 year old male and 12 years聽
later you got your money back by making a one-time聽聽
[419]
payment non-MEC traditional life insurance policy聽
not attractive right I wouldn't do it I wouldn't聽聽
[426]
do it at 30. Let alone 60. Then we've got the聽
examples with spreading it out over three years聽聽
[435]
so annual out of pocket is one hundred聽
thousand dollars much stronger break-even point
[444]
look at this year four very strong from聽
a performance standpoint and this also聽聽
[451]
begins to address the question we hear聽
all the time for someone in their 60s聽聽
[456]
you know we'll hear "I've got to be too old聽
for life insurance" right if we're price quoting聽聽
[461]
the cost will be higher if you are optimizing it聽
for cash value the death benefit will be lower聽聽
[467]
for an older individual than it is for a younger聽
individual that makes sense we've got more content聽聽
[472]
we can send you on that if you like but point聽
being spreading it out over three years way聽聽
[477]
stronger break-even point if you want to compare聽
the year 12 mark look at this difference over 100k聽聽
[484]
same insurance company same out-of-pocket just聽
spread out over three years and you've produced聽聽
[490]
over a hundred grand more than the one time lump聽
sum it's interesting isn't it the reason why聽聽
[498]
This base premium here you covered聽
it for three full years meaning those were聽聽
[506]
years it did not have to pay itself those are聽
two years less of drag that you had over here聽聽
[513]
now beginning year four there's drag on the policy聽
but you've got enough money into the policy where聽聽
[519]
it's compounding there's enough acceleration聽
there's enough movement forward to help聽聽
[525]
make up for the drag so now I'm starting to see聽
okay spreading it out over three years got the聽聽
[530]
policy up and running so now I can easily support聽
that premium and still appreciate and then we make聽聽
[537]
the exact same move here after year seven cut聽
the death benefit term reduction reduce paid up聽聽
[544]
this is optional we don't have to do it but聽
it does accelerate the cash value growth
[550]
and then we've got spreading it聽
out over five years so 60 for five
[557]
you'll notice the ratios remain聽
consistent in all of these聽聽
[563]
what happens now break even same聽
point in year four same point in time
[570]
it's different though much stronger cash value聽聽
[574]
beginning year seven actually we've only聽
got two years of drag we can call it where聽聽
[580]
that premium is due and we're not paying
it is a much lower premium so the policy only聽聽
[586]
has to internally pay a 6k premium聽
as opposed to a 10 or a 30,000 premium聽聽
[593]
so the interest earned is greatly exceeding the聽
premium due here so this is why if we look here聽聽
[600]
not a huge difference but you do see there's聽
about 2k here as we look over time about 4k
[611]
again not huge you'll find that the sweet spot聽
for someone age 60 is typically going to be between聽聽
[618]
four and five years but right here not a big聽
difference even with the three pay but it's good聽聽
[624]
to see this kind of stuff presenting options and聽
such where we see everything up front so there's聽聽
[628]
no chance of buyer's remorse or anything like that聽
you know a lot of times when showing these options聽聽
[634]
someone might say okay you know I've got the聽
lump sum today I don't want to be on the hook聽聽
[640]
to pay anything thereafter but I might want to聽
keep adding money I want to keep that option聽聽
[645]
open Steve I don't want to just shut it down聽
after three years which you can definitely do聽聽
[650]
so in the case with any of these I mean in theory聽
you could make the 300 or even make the one-time聽聽
[656]
300 payment but let's say we do this one 100 for聽
three and then you stated you know what I want to聽聽
[662]
keep funding I had a couple good years I can't pay聽
in 100 anymore but maybe I'm paying in 25k a year聽聽
[670]
and I pay that for five or seven聽
years maybe I go all the way down聽聽
[675]
I want to keep on pumping cash into聽
it you can do that kind of stuff聽聽
[679]
now depending on how much the upfront聽
design is important point being can聽聽
[683]
design it to be flexible so in any event to聽
kind of get back on track when it comes to聽聽
[688]
funding a policy with a lump sum it is often聽
more efficient for the consumer to spread it out聽聽
[696]
Hey guys Steve Parisi here if you enjoyed the聽
content you just saw please subscribe like and聽聽
[703]
hit the notification bell for future videos if聽
you'd like more information or to see some custom聽聽
[708]
policies for yourself feel free to call or email聽
our offices at the contact information below
Most Recent Videos:
You can go back to the homepage right here: Homepage