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Designing A Policy For MAXIMUM Cash Value | IBC Global, Inc - YouTube
Channel: Insurance Business Concepts (IBC) Global
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How to maximize Cash Value and the Policy Design聽
so we are going to take a look at exactly how to聽聽
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design a policy for maximum Cash Value let's get聽
into it so when you take out a life insurance聽聽
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policy and you're going to pay any amount of聽
money into a policy let's assume you're not just聽聽
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price quoting for a death benefit but you want a聽
truly cash flow policy and use it as a flexible聽聽
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savings asset your money can go towards one of聽
two areas at the end of the day we have the Base聽聽
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Premium I'll also refer to this as the insurance聽
expense and then we have the PUA stands for Paid聽聽
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Up Additions Rider I'll refer to this frequently聽
as a Cash dump-in so what you want to understand聽聽
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from a policyholder perspective or from an agent聽
perspective and if we're educating our consumers聽聽
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on this is how to design a policy for Maximum聽
Cash Value how do these different areas function聽聽
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let's assume we're going to pay a thousand dollars聽
per year into the Premium piece for the insurance聽聽
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expense component and then the thousand dollars聽
per year into the PUA Rider the cash dumping聽聽
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dollars that go towards your insurance premium聽
piece in respect to your Cash Value with a聽聽
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traditional Whole Life Insurance policy what you聽
will see in most with most companies and products聽聽
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in the first and second year that thousand dollar聽
payment zero shows up in Cash Value and again聽聽
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that's the first and second year the reason why聽
is the company is overcharging me for the death聽聽
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benefit upfront with a Whole Life Insurance聽
policy in respect to my base Premium dollars聽聽
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the insurance company really over charges me in聽
the first two years now some products it's only聽聽
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the first year some are the first three years but聽
with a traditional product of most companies it is聽聽
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the first and second year now what's important聽
to note here is while I call it the Insurance聽聽
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Expense it does not that it is a forever Insurance聽
Expense you will find from the third year onward聽聽
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that $1,000 Premium payment regardless what the聽
number is if it's $100,000 Premium payment will聽聽
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begin to credit the Cash Value accrued dividends聽
and the growth will accelerate over time so my聽聽
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main point is this Premium dollars do build Cash聽
Value or call it equity over time it's really just聽聽
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the upfront hit that I have to be aware of that's聽
where it's gonna hurt me in respect my cash value聽聽
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up front now dollars that I paid towards the PUA聽
Rider the cash dump-in component pay a thousand聽聽
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in I see just about all of that thousand show up聽
some companies it's all of it someone might be聽聽
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nine hundred eighty dollars some companies have聽
fees and such up front for their PUA Riders but聽聽
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dollars that go towards the PUA component this聽
is money I can access it begins to yield the聽聽
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guaranteed rate and dividends sooner because I聽
have money in Cash Value immediately now it will聽聽
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buy me some Life Insurance PUA states are paid聽
up additional life insurance depend on my age we聽聽
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might see on average by paying a thousand bucks in聽
another thousand dollars I'm sorry another three聽聽
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thousand dollars show up in a whole life death聽
benefit as a result so a question we often get聽聽
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is Steve I don't care about the death benefit how聽
do I put a hundred percent of my payment into the聽聽
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PUA component well we cannot go quite聽
that aggressive depend on the limits set forth聽聽
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by the insurance company and then by the IRS聽
the IRS has to do with our MEC limit now real聽聽
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quick the MEC limit without getting into much聽
detail here and you're not aware of this we can聽聽
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actually set it wherever we want we have control聽
over this you'll find that it has a relationship聽聽
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to one's age in death benefit think of it this聽
way that is the measuring stick that the IRS uses聽聽
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to determine if a Life Insurance policy will be聽
viewed as life insurance in their eyes or a pure聽聽
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taxable investment good to be aware of that now in聽
respect to how much money can go towards premium聽聽
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and PUAs 100% depends on the company we see聽
a lot of companies offer this 10 90 split meaning聽聽
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if I want to put 10,000 per year to a policy or聽
if I have a one thousand dollar minimum premium聽聽
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I have the ability to go up to 10k if I wanted to聽
put a 100k per year I need to set down to ten and聽聽
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some smaller companies have no limit to that I聽
can drive it as low as I want but main point is聽聽
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this money can go where Base Premium or PUA Rider聽
how do I understand the insurance company limits聽聽
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and IRS limits so I can squeeze that premium as聽
low as possible and get more money into PUAs聽聽
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accelerating the initial and long term cash聽
value growth so we've got a quick example here聽聽
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this is on a 40 year old male with the exact same聽
insurance company Whole Life product and here's聽聽
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what we got on the left we have a traditional聽
Whole Life Insurance policy he's paying twenty聽聽
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thousand dollars per year in here's his Cash Value聽
and we haven't been read here until you see the聽聽
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highlighted year you highlighted in yellow piece聽
year fourteen the reason why is at that point聽聽
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in time he has finally generated a positive cash聽
value meaning over 14 years he's painted $280,000聽聽
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and he has 287 at this point time so a traditional聽
old school Whole Life Insurance policy does accrue聽聽
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Cash Value but look year one I paid 20 grand聽
I have 0 year two I paid another 20 total of 40 K聽聽
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I've got 3 grand to show for now Cash Value starts聽
to accrue getting more more back than what I'm聽聽
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paying in right around here seven or eight but it聽
takes a long time in 14 years to yield a positive聽聽
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Cash Value then we've got a policy with a 10 90聽
split same company same age same outlay for the聽聽
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policyholder 20k going in minimum Premium it's聽
right around $2,000 as a term writer attached as聽聽
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well but here's the main difference year one over聽
17,000 instead of 0 very similar death benefits聽聽
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and that had to do with the MEC treatment but聽
then year four I've paid an 80 I've got just about聽聽
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80. 79,835 and I'm positive by year 5 continue聽
to pay in the same amount for the same period聽聽
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of time much stronger cash value by year 15 I've聽
got just about $100,000 more so again the purpose聽聽
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of this is to teach one how to maximize the cash聽
value of a Life Insurance policy if my goal is to聽聽
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use it for retirement income just a safe place to聽
position money practice IVC this is going to show聽聽
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you how to beef up your Cash Value first so you've聽
got more capital to work with short term and long聽聽
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term so we paid it for 15 years well let it sit and聽
grow right here 30 I've got about another two聽聽
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hundred thousand dollars more the only difference聽
here just to reiterate is where my money's going聽聽
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because again I can go toward my Base Premium i.e.聽
the initial insurance expense or the PUA Rider so聽聽
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when it comes to policy design this is the most聽
important piece to maximize the Cash Value in聽聽
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flexibility for that matter can design a policy聽
where I commit just to this and throw money into聽聽
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here whenever I want depending on the company聽
but how do I maximize the cash value first and聽聽
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foremost if I understand the policy design I'll聽
be set up where things were likely go very well聽聽
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me point to this if I design the policy properly聽
I'm set up with some cash value from the get-go聽聽
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long-term in most most scenarios as well and聽
we'll be happy with the policy hope this helps聽聽
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hey guys Steve Parisi here if you enjoyed the聽
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