Introduction Of Starting Policies for the Next Generation For Insurance
Starting Policies for the Next Generation For Insurance. The first thing before we had any communication she sent this she said I’d like to give these policies to the kids with no strings attached meaning not required to pay anything after I get the desired dollar amount into the policies meaning once she moves.
The policies on her three children
That portion of money into the policies on her three children she does not want to be required to pay anything and she does not want her children to be required to pay anything the next thing she mentioned is when they receive the policy I want them to have access to as much cash value as possible that is a specific goal of her so she doesn’t want to have to pay in for a long period.
I want to get the money into the policy and stop and then I want them to have access to the money now as we progress through this we are going to show some options to one and show her exactly what she wants to see just from a business process or running a business my firm belief shows the individual what they want to see if you as the professional the agent feel better options exist shown.
That in addition to what they want to see what drives me up the wall is when I ask for a certain product or service and someone shows me something else because they think it’s better for me it’s like now show me what I ask for so if you’re in the business make sure you’re always showing the person what they want to see first and foremost and then you can show additional options anyway.
Seven pay policy
Let me get back on track so I don’t ramble here so what she has specifically requested is she wants to pay five thousand dollars each for each of her three children but here’s what she mentioned which immediately told me she was doing some good research she was interested in a seven pay policy so the nice thing about.
A seven-pay policy is you can fund right up to the mech limit for seven years and then shut it down with what is called a reduced paid-up option this eliminates the premium altogether and really what you’ll find in most cases is that it maximizes the internal rate of return the overall growth rate of the cash value on a guaranteed and non-guaranteed basis can be very attractive so that’s.
That’s what she’s interested in in this particular case so what we’re going to look at here is five thousand dollars per year going into a policy for seven years so that’s 35 000 total 5k times seven years put over three policies so that’s just over a hundred thousand dollars total you’ll see it when we go through the numbers here but one of the things I mentioned earlier show.
Starting policies for minors or their children
The individual what they want to see however building additional awareness is always a good thing, in my opinion, we don’t want to info overload someone which I’ve been guilty of many times but providing that additional awareness this way I don’t get into an option and then find out after the fact if I could rewind the clock I would do things a little bit differently than.
What I did in the past so a lot of times when people are interested in starting policies for minors or their children who still have a long way to go just with life funding it for seven years and stopping is appealing when you look at the internal rate of return we might want to fund it for a longer period so if.
We can build in the option to pay and to pay into the policy for a longer period would that be something that you might be interested in maybe not if it was me I would like to see it as an option so the kids might see the benefit to adding more money to the policy when they receive it perhaps they receive it in year seven or year eight and they see wait a minute this is a great area to position money.
We can build in a ton of flexibility
The cash value is safe liquid tax-free if it doesn’t become a modified endowment contract or I don’t trigger a taxable event I’ve got all these benefits and it’s growing between that three to five per cent per year like I’m interested in that can I continue to add more money to this product can I keep on feeding the beast if we exercise that reduced paid-up option after seven years and just shut it down the answer is no back to options.
We can go with the same policy where I can elect to stop funding altogether after seven years or I can keep funding and I do not need to decide that up front we can build in a ton of flexibility so when I hit year 7 I gift it to the kids they want to keep funding it they can keep funding it completely up to them or we can shut it down so. You Can Also Read Cash Value Collateral Loans – Policy Loan Insurance.
We don’t have to decide now my point information here specifically what we’re going to look at is as follows we’ve got a 32-year-old male 31-year-old female and a 27-year-old male I did not write that info let me write it right here quick male female male funding 5k per year for seven years and then also 5k per year for seven years and then one thousand dollars per year years eight through thirty now.
What’s the policy look like if I pay in 5k per year
They can continue to fund a higher dollar amount but what a lot of people appreciate this is just from time and experience is hey what’s the policy look like if I pay in 5k per year but if my son or daughter does want to continue to fund it I don’t know that they’re going to be comfortable or have the ability to pay in the full 5k per year can they pay just the minimum premium or in this case a thousand dollars per year.
The minimum premium in some of these examples is about 500 per year a little bit less on some of them actually but just for the sake of round numbers we wanted to show the 5k per year for seven years and then 5k per year for seven years so these two are the same policies but what does it look like.
If they keep pumping money into the policy and we’re going to look at two different companies here mass mutual and guardian two of your four major mutual companies let’s get into it what we will begin with is the exact option that she wanted to see which is this guy the 5k per year for seven years with nothing thereafter not required to pay another penny to let’s have some fun.
Policy beyond seven years
So what do we see here 32-year-old son 31-year-old daughter and 27-year-old son these examples are pure seven-pay funding right up to the mech limit for seven years and then shutting it down I’ll add that we did over inflate that mech limit a little bit which doesn’t matter in this case but I did over inflate it’s higher than five thousand dollars and that allows them to continue to pump money into.
The policy beyond seven years if they want to but here’s seven years, not a penny thereafter maximum cash value first year five thousand dollars goes in about forty-two hundred dollars right off the bat what’s highlighted in yellow represents the break-even point so as we look at our total payments just about year five you’ve paid in 25 000 you have 24 917 by year six you are positive after year seven.
You see no payments made whatsoever the premium is not due we completely killed it with that reduced paid-up option which eliminates the premium once we execute that reduced paid-up option even if we want to add money we cannot we can borrow and repay all day long but we cannot continue to make premium or pua payments.
Which will not remain steady for the next 40 years
If we execute that reduced paid-up option you’ll also notice that the death benefit drops initially when we do this so here this is what she wanted to see so we want to start exactly where the client is or the potential client is where they want to start cash value continues to grow let’s take a look at it over the long haul there we go if we look at age 70 here.
What’s he got 167 000 in cash value 235 and death benefit based on the present dividend interest rate which will not remain steady for the next 40 years or in this case 39 years it is going to adjust as time passes moving on to the next example 31-year-old daughter same 5 000 in a little bit stronger cash value not much of a difference.
But a little bit more by year five and positive as opposed to the 32 year old son you’re still just under 25k do you know why the difference difference exists there because they’re about the same age they’re one year apart females live longer than males on average typically by about seven years so what that means is that the internal insurance expenses are a bit lower now going back to that seven years on average and how that factors into life insurance pricing.
