Introduction Of Constructing 10/90 Policies What Does Your Contract Loan Policies
Constructing 10/90 Policies What Does Your Contract Loan Policies. How a policy can be set up for maximum cash value with a 1090 design meaning 10 base premium 90 pua maximum cash value was produced about two and a half years ago uh it was designed for our agent training business ils agent academy and we walk through actual language.
Particular policy and then the full contract
That exists in the illustration of a particular policy and then the full contract what is interesting is you’ll see what the standard pua limits are that exists with a company you’ll see that in the illustration but then you’ll see in another part of the contract additional provisions that exist that allows a policyholder to dump more money into puas and maximizing.
That cash value and we’ll talk to you soon here we are going to take a look at a guardian life insurance policy guardian is known as one of the more flexible life insurance companies out there and when I say flexible I’m regarding the pua payments.
I can add puas into the policy at leisure and I can have a lot of flexibility if I set it up properly so up on the screen we have a policy on a 40-year-old male you see 50 000 per year paid into the policy now when we look at the design we have a five thousand dollar minimum premium you see a five thousand dollar scheduled pua rider and then.
The contract language specifically
You see forty thousand dollars going into unscheduled payments per year now when you look at the net cash values looks great breaks even just about year four this is optimized for high cash value performance now it is important to be aware of the insurance companies limitations while this illustration looks great the contract language specifically in the full illustration can contradict.
What we’re doing here and the last thing we ever want is to show someone a policy they’re ready to go and they read the full illustration and they see something that contradicts what you’ve shown or your competition points it out and they doubt your credibility then makes life difficult so next we’re going to look at page three of the full illustration so on page three you’ve got a lot of languages here.
But up top, you see in bold a section referencing the pua limitations so specifically, this reads this illustration shows one or more pua payments after year one that exceed a specified multiple of the base policy premium the multiple is three times the base policy premium in years two through ten and one times.
The conditions may be that the insured provides
The base policy premium in years 11 and later payments over this limit are subject to approval one of the conditions may be that the insured provides satisfactory evidence of insurability okay so what does this mean a lot of languages there and it can be confusing what this is stating is if I have a policy set up back to the illustration we had fifty thousand per year going into the policy.
What was my base premium of five thousand dollars this language which is part of the full illustration the same as those numbers we just showed states that in years two through ten I can pay three times my base premium into pues per year if I have a base premium of five thousand dollars this means I can add another fifteen thousand dollars per year puas on top of that for a total of 20 000 a year?
We illustrated 50 000 there that contradicts itself right there years 11 forward it states if I have a 5 000 premium how much can I add puas one time that amount that’s another 5 000 on top of my 5k base a total of 10 000 per year so a client reads this or a competitor points this out remember I am showing 50 000 per year for 15 years this language states that.
Contribute 10 times my base premium
You can’t do that Mr client could have a potential problem on my hands here’s the thing when we look at a guardian life insurance policy this language that we just went through is stating the pua limitations on a policy if we have the basic paid up additions dividend options selected just a basic whole life policy if we have the policy set up like we did when we go back to the illustration.
We had a level death benefit the specific dividend option for this policy is a level q term give it an option q what this does so if you go back to the numbers here what do we see we see 50 000 a year going in net cash value is strong upfront look at our death benefit though in the far right each year as we pump money into the policy as we pump money into puas with a basic. You Can Also Read How To Focus On The Consumer Not Follow Competitions Insurance Loan Guide.
Whole life policy that death benefit would increase here it’s level what’s happening look two columns to the left of the net death benefit face amount of one year term as my whole life grows really from those pua payments and dividend accrual my whole life death benefit increases my term decreases keeping me level so the company will allow me to continue to contribute 10 times my base premium.
A full contract so this is about 100 pages
If the policy is set up in this manner okay sounds great but how do we prove that a client says okay steve that all sounds great but I have to have it in writing well let’s show it to them in writing so in the full illustration page three highlights guardians basic pua limits and that’s what can cause some issues for us what we’ve got up here is a full contract so this is about 100 pages.
I should say we have one page from the full contract that specifies the pua limits and the exception if I have the policy set up properly so on this page if I’ve got a full policy from the guardian if I have the pdf version I’d encourage you to pull it up on your computer hit control f and search maximum pua payment limit to get to this section.
Because this contract is very thick here under this section regarding the maximum pua payments firstly we see that the company refers to the basic pua rider specifications 3x during the first 10 years 1x thereafter however we have highlighted in yellow here plus the amount of any target face amount associated with any one-year term insurance with target face amounts writer attached to the policy so.
What this contract language is specifically stating
What does that mean well if i have that dividend option selected level q term that means i’ve got that decreasing term writer attached to the policy what this contract language is specifically stating the basic pue limits are enforced plus I can add plus puas that may be added to the policy that buy down term insurance meaning guardian will accept 10x.
The minimum base premium to be paid into the policy per year without any medical underwriting provided this term writer is attached if the term writer is not attached if we chop it off or it naturally expires then my pu8 limitations are going to go back to the default contract language another piece we see so next we’re going to pull up a piece from guardian’s home office this is a rider manual and on the bottom well first underneath maximums you’re going to see similar maximum limits I can pay three times the base premium in p ways years one through ten.