In today's video
we are going to discuss
how to maximize the cash value
of a whole life insurance policy
and provide awareness
on PUA limitations.
So what I mean when I say PUA limitations
is when you pay any amount of money
to a whole life insurance policy
and your goal is to maximize the cash value
you can decide where your money goes.
Instead of me saying
okay here's a $1,000,000 death benefit
here's how much it costs you
that's the worst approach in my opinion
if you're interested in maximum cash value
instead what you can say
is here's how much
I'd like to be able to pay into
a whole life insurance policy.
My goal Steve
is to maximize the cash value
I'm attracted to the cash value
because it's a safe
liquid
and tax-free area to position funds
so here's how much money I want to get in.
Well did you know
that you can actually choose
where your money goes
if you're paying in a dollar let's call it
you can decide how much
or what percentage of that dollar
is directed toward the insurance premium
and then what percentage of that dollar
is directed toward the PUA Rider
so let's have some fun
and look at some numbers.
So to begin
a question we get quite a bit
is the question we see up at the top
can I add a lump sum
on top of a 10/90 split?
So we are going to address that question
in this video and the next several videos
as we look at a number of
different companies and products
and what I'll add to that
is it does depend
the answer is yes
but it does depend
on the actual insurance company.
So to begin here
what I want to start off with
is that part about you paying a dollar
into a policy
and where is that dollar going?
Well you can decide
where your money goes
in a whole life insurance policy
and there are 2 primary areas
at the end of the day
we have (1) your base premium
dollars that are directed toward
the base premium piece
of whatever dollar amount that is
with a traditional whole life insurance policy
typically generate zero
meaning you could put $1,000
toward the premium
or $100,000 toward the premium
and typically you will see zero
of that premium payment
show open cash value in the 1st year
and also the 2nd year.
Some products it's only the 1st year
some products
do give you some premium dollars
in cash value in the 1st year
however the premium dollars
typically inflict the most financial pain
meaning when I see that negative hit
if I pay any dollar amount
into a life insurance policy
and I have less in value
than what I paid into it
what takes the biggest bite
out of your cash value is that premium
right out of the gates.
Now the reason why
the company is going to
overcharge charge us
for the cost of insurance
the heaviest charges
are in the 1st and 2nd year
and what we're really doing
with those premium dollars
is purchasing a whole life insurance
death benefit
that actually buys the life insurance.
Now it's very common to hear
someone say well
that's all well and good
but my goal here is cash value
I don't really care about the death benefit
we hear that quite a bit
and that's okay
whatever your goal is
your goals are with your policy
it's your money at the end of the day
so we want to show you call it
the rules of the game with the policy
in different companies
so you can play within those rules
and really maximize your value.
So premium dollars
do not show up in cash value
right off the bat
eventually beginning the 3rd year
they start to come back
however this guy, this PUA
which stands for paid-up additions
I like to refer to this as a cash dump in
money that is paid into this area
shows up in cash value.
Depending on the insurance company
you select
and also the product
different companies
have different PUA fees
what you will usually see
in the 1st year alone
of whatever the PUA payment is
somewhere between 90%
and 95% of the PUA payment
will show up in cash value
not the total dollar amount.
So as an example
if you are paying in
let's call it $100,000 into the policy
so $100,000 is paid into the policy
and where is the money going?
That's the main question
well let's assume
we've got this 10/90 split we see up top
what that would represent is 10%
or $10,000 would be directed
toward the premium
which would not show up in cash value
in the 1st and 2nd year
and then 90% would be allocated
toward that PUA payment.
Of that $90,000 you would see
between 90% and 95%
show up in cash value
that's money you have
access to immediately
this is also the key
to maximizing the cash value
both on a short-term and long-term basis
this is especially true when you look at
real results not just illustrations
and then the guaranteed values
on the illustrations
if you like to see a worst-case scenario.
So what we've got here
is really how to design a policy
for maximum cash value
so we just gave an example
of a 10/90 split
as far as you paying money into a policy
how low can you go
on the minimum premium is 10%
is often as low as you can go
with some of the major mutual companies
with a few exceptions
which will have some fun
as we go through specific details
as far as what different companies allow
and do not allow
but the answer is it does depend
which is one of my least
favorite answers by the way
whenever a question is asked
and someone says it depends
okay it depends on what?
Give me some specific examples here.
So having awareness
on PUA limitations
specifically
with different insurance companies
if you attach certain Riders
that can sometimes expand
your PUA limitations
it's really just knowing
or call it being aware of what is
and is not possible
the more awareness I have
the more knowledge I have
before starting a policy
the more I can then do with that policy
that has to do with funding it
or designing it for maximum cash value
that has to do with using it down the road
if I plan on taking loans
to invest in real estate
my business
whatever it might be
the more knowledge I have
or my agent has
if they're providing advice for me
and helping guide me through that journey
the more I can do
just from an overall design standpoint
and call it a financial standpoint
because it's your money in the policy
how do you just maximize your money
and get the most use out of it?
So let's have some fun here
some awareness on PUA limitations
some examples
we're going to go through in this video
the next several videos are as follows
we're going to go through MassMutual's
PUA language
when I say language
what's in their contract
their company memos
what they allow
what people that we've worked with
for years
are actually doing with their policies
with no issues.
Guardian and New York Life
3 of your 4 major mutual companies
and then 2 smaller companies as well
that we get questions about frequently
Penn Mutual and Lafayette Life
so we'll have a lot of fun with this
as we get into everything.
If you enjoyed this video
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and if you have any questions
feel free to leave them
in the comments below
I do read those
and as always I hope this helps.
Thank you so much.
Hey guys Steve Parisi here
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