Whole Life Insurance: Split Study - Overview | IBC Global, Inc - YouTube

all right we are going to touch on a popular  topic which is understanding how the cash  

value grows in a life insurance policy and in  particular we're going to focus on a split study  

and what that means is how much of my payment  is directed towards base premium and how much  

is directed towards PU ace this is geared  towards agents and consumers if you are an  

agent in the industry our training program will  cover everything in this series x 30 so there's  

a lot more details a lot more examples this is  meant as more general education so whenever we  

have a policy what we're going to go through  here is understanding how different areas in  

life insurance policy actually work because I have  my base premium in my PUA Rider those are my two  

main components may have a term rider attached  as well but they'll be minimal these are the two  

main areas now with any life insurance policy  what is going to grow the cash value over time  

aside from my payments is the interest credited  to the policy that's made up with two components  

you'll see the guaranteed rate and then also  the dividend rate which will be technically  

the surplus we're going to touch on that next so  that mean purpose of this entire video series is  

going to see if I'm going to paint a dollar what  percentage should go towards these two areas and  

at any point in time does it make sense to have a  higher premium or someone telling us that us as a  

consumer and agent is telling us that because for  whatever reason how's that giving tiny details so  

let's start to break things down here so with  an insurance company we're going to go through  

how the guaranteed rate and surplus works first  so let's assume I have an insurance company I'm  

working with the company that has published a  total dividend rate of 6% all right what does  

that mean well they credit a gross dividend  rate remember dividends or a grocery credited  

to policyholders after the cost of insurance  and mortality charged now what that element is  

made up of the total dividend rate of 6% I have  my guaranteed rate of 4% and then they declared  

a surplus of 2% the two together equates my  total dividend rate what this says here is  

imitated column on illustration and we have it  right below the surplus so whenever I look at  

a detailed illustration from any life insurance  company sometimes you can be confusing because I  

look at my total cash value I look at my dividend  column the company's total dividend rate is 6% and  

when I start crunching the numbers it comes out  to like a point and a half or two percent very  

confusing because the illustration will often  say annual dividend on the illustration which  

makes me think it should be the total dividend  rate item to be aware of here is that annual  

dividend column only reflects the surplus another  way to put it is the guarantee is not included in  

this column but at some excess information  now here's we're going to go into a little  

more detail here here's the important piece if I  have money going towards base premium and PUA's  

I want to understand how interest is going to  be credited and if an insurance company favors  

base premium dollars for PUA $1 what's gonna  ultimately drive my cash value north that's  

that's the name of the game that's what everyone's  interested in so I have a guaranteed rate of 4%

with most insurance policies and companies  especially the larger carriers that guaranteed  

rate of 4% is exactly the same on any dollars  that go towards the base premium or that going  

towards the PUA lighter important to be aware of  that another item to be aware of is the guarantee  

of 4% is the same but dollars I paid to the base  premium what happens with the traditional policy  

the first and second year if I pay $10,000  premium nothing shows up in cash so what  

that means yes I'm yielding the guarantee of 4%  but there's nothing there to earn 4% because the  

company has overcharged me for the the cost of  insurance the death benefit upfront after that  

the guarantee begins to be applied now before I  go too far the 10,000 over here where does that  

go PUA payment cash value that's money that  becames to give the guarantee sooner because  

it's in cash value it's accessible I start  to see it grow sooner and in the next couple  

segments you're going to see examples on this  now in respect to these surplus so assuming  

that example where I had a total dividend rate  of 6% what that means is my guarantee was for my  

surplus was - okay so the surplus here's where  it gets tricky this is more favorable on base  

premium dollars meaning the insurance company's  dividend rate their surplus everything above the

guarantee their formulas when you actually break  down how an insurance policy works that's a nerd  

out on you here but what happens is they do  favor base premium dollars so when you look  

at illustrations from 10 plus years ago when  different rates were higher but when sometimes  

makes sense to have a higher base premium because  that higher dividend that surplus formula favors  

the base premium meaning you're gonna see a  higher dividend number on any illustration  

the next couple segments are next couple of  videos when we actually show some numbers here  

on a higher base premium split very important  to be aware of this whereas the surplus on PUA is not as favorable no this can be confusing  and this is definitely one of the most technical  

topics there's so how do I earn interest on the  policy or how is accredited guarantee same on  

base premium PUAs surplus the rest of that  dividend payout more favorable overtime on base  

premium dollars remember though nothing shows up  in the beginning so yeah it's more favorable but  

I'm not really getting anything because nothing  is there so I'm out of the gate slower whereas  

this one is a less favorable surplus it's  going to be a lower dividend but on a larger  

amount of money keep that in mind so other items  to consider because the above can be confusing in  

the next series will shed some light on it the  next series next couple of videos because we're  

gonna break it down very thoroughly is what split  yields more cash at the end of the day that's the  

main question the whether that dividend shows  a thousand dollars or zero my net cash value  

which is the money you actually have access to  as a policy holder that's the important piece so

what policy designed what split whether it's a  forty percent premium or ten percent premium or

five percent premium whatever it might be how  do I generate the most cash value big item to  

consider because this is going to affect policies  this is in speaking with insurance companies how

they feel some of the larger companies - what  they feel is for at least the next 10 years

the low interest rate environment were in right  now is going to remain exactly as it is they're

not expecting or foreseeing interest rates coming  back up why that's important is in respect to the  

dividend rates with all life insurance companies  we should not expect them to skyrocket any time

soon and why this is important is because if the  surplus remains the same or goes down I definitely

want to make sure I'm looking at the dairy he cash  values which one of our videos is going to touch

on and this will help shed more light on what  split do I want to go with in the event dividends

go down which one's gonna ensure I've met the  most possible cash value that's the name of the 

game how do I optimize the cash value of a policy  we'll get into that with some numbers hope this helps

Hey guys Steve Parisi here if you enjoyed  the content you just saw please subscribe like  

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