Okay, so here we are going to take a look at our 10/90 first the 40/60 split and specifically focus
on be guaranteed values this is very similar to a previous study that we looked at except where
we cut the term writer we didn't do that in the last study and we want to make sure we see
a fair comparison here. So very quickly we have a 50 year old male only looking at the guarantees at
4 or 4% so we're assuming zero dividends are paid to this policy guaranteed interest rate scenario
on the term writer the company is also going to charge the maximum allowable they can when
the term writer is attached. Some extra information there. But then for our funding 50,000 years 1 through
7 and then 20,000 years 8 through 20 we did a current dividend study of this as well this
scenario illustration policy matches that exactly again only looking at the guarantees. 40/60 split
will represent 20,000 or 40% of the 50K into the Base Premium 30K into PUAs the 10/90 split will
represent 5,000 into the Base Premium and the remaining 45,000 into the PUA component so that
will a hundred percent of the time accelerate early Cash Value growth what we want to look
at here though and examine is will it accelerate long term Cash Value growth because the argument
we sometimes hear is a higher base premium split a 40/60 for example will generate stronger
long-term Cash Values or that is where the power of the compounding is you're going to see
that that's not the case here that can be the case in the hypothetical high dividend scenario
but when we look at how an insurance policy actually functions you're going to see the
lower the premium the more Cash Values short term and long term so quick refresher if you have not
viewed our overview video when it comes to Base Premium dollars and PUA dollars remember
that the guarantee is applied to these dollars in the same manner the 4% guarantee is applied
to Base Premium and PUA dollars in the exact same manner everything above the guarantee the
surplus remaining dividend payout and insurance company disperses to their policyholders is more
favorable to Base Premium dollars so this is sometimes the argument we hear why one should
go with a higher Base Premium and I'd refer you to our dividend study or our overview video on
the split study for more information on that. Let's take a look at the comparison now so we
will start with the illustrations just to validate everything so here is our 40/60, 50 year old male
going to fund the policy for 20 years here is our Premium and here's our PUA component 40/60
split now shared guarantees are on the left when you get out of the way we're going to look at the
20-year funding here 50 for seven years and then 20 years 8 through 20 computes to a total output
of $610,000 this is how much the policyholder paid into the life insurance policy. So with a
higher Base Premium split remember in the early years that base premium does not go into Cash
Value that's what the insurance company over charges me for the cost of insurance I've paid
in six hundred ten thousand by year twenty I have 606 it's between years 20 and 21 where I
finally generate a positive Cash Value that's what I break even. Now when I look at a 10/90
split with the exact same insurance company, the exact same insurance product, same health rating,
same individual drastically different results. Even though I've been doing this for a long time this
piece always fascinates me how you can use the same product everything and get much different
results. Here's our Premium piece here's our PUA piece now quick side note it's not a true forty
five thousand dollars the reason why that is the cost of the term insurance is our term rider which
does decrease as our term rider decreases the cost that is but then we also cut it after year
seven here. So let's take a look at our guarantees there we go so forty sixty when was your breakeven
by here twenty one where you've paid in six hundred ten thousand and you had just over
six hundred ten thousand here your seven when we just so happen to cut the term rider as well prior
to that actually I've paid in 350 I have three fifty keep in mind guarantees are reflecting the
absolute worst case scenario if I followed this funding pattern cross over point or break even
as a year seven beefing up the early Cash Value now I want to look at it long term as well we
know by year 2021 we have more because we just looked at the 40/60 split but let's take a look
side-by-side what do we got 40/60 on the left 10/90 on the right all of this is peeled
straight from the illustrations from the design software what's highlighted in yellow is your
break-even point now before we scroll down near twenty the only problem we added here was the CV
which stands for Cash Value difference so what you're seven you have approximately forty four
thousand dollars more in Cash Value with the 10/90 as opposed to the 40/60. Let's
look at this long term again especially if we've heard that the power of compounding growth and a
Life Insurance policy is in the Base Premium now that's based off of hypothetical dividends when
you actually look at how life insurance works and if you've looked at our BOLI study Bank- Owned Life
Insurance and see how those policies work they function very similar to a large PUA deposit
when you look at the actual Cash Value and growth so why would we not want to mimic them so
here's our breakeven point with the 40/60 year 21 let's look at your thirty dollars you've
paid in six hundred ten thousand with the 40/60 split by year 30 you've got seven hundred
seventy thousand dollars with the 10/90 split and all this means is you put ten percent of your
payment into the Base Premium instead of forty percent of it now you have two hundred twenty
two thousand dollars more with the 10/90 looking at the pure guarantees huge difference
there now we looked at the non-guaranteed study as well same thing where we had more cash with
the 10/90 split it always comes out comes out on top how I look at it as well is when we
are building in Cash Value Life Insurance policy if our goal is just to position money and Cash
Value life insurance or if we want to pull money out and use it whether it's for retirement IPC
whatever it might be why would we not want more money from start to finish thinking one range
but also thinking how can I use it immediately as well and we capitalize a views
the policy so understanding the policy splits and such can be a little complex as you can see
but to simplify what you'll always see the case especially if you're looking at the guarantees
squeezing the Premium down will generate more Cash Value from start to finish hope this helps
hey guys Steve Parisi here if you enjoyed the content you just saw please subscribe like and
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