Hey everyone, I'm Justin Garman, a wealth coach here at Better Wealth. And today we're going to answer the question, how soon can I access my cash value? So after starting a life insurance policy, usually one of the first questions I get or somewhere along the way is how soon will I be able to access the funds? Or another way, how quickly can I borrow against my policy? Do I have to wait 30 days? Do I have to wait a year, two years until the policy? Cash value has grown bigger than what I put in. All of those are great questions. It's a great question because honestly, for many people, especially a lot of the people that we work with, whether it's a real estate investor, business owner, or someone just trying to build up an emergency or opportunity fund, liquidity is one of the biggest reasons why they're even interested in getting a properly designed whole life policy in the first place. And so that's really what they want to know. They want to know how soon they can access those dollars and get access to that for anything that they may actually be using it for. So when someone hears that with life insurance, they can access the funds immediately, that sounds almost too good to be true, simply because they probably heard a lot differently from other people. And that's because traditionally that may be the case. But let's break it down. carefully today because how soon you can actually access those funds really depends a lot on the actual design of the policy. So first, we will start with a traditional heavy base policy. This is the kind that you'll hear people talk about when they say life insurance is a terrible place to store money. I mean, if you're wanting it for access and liquidity, then they would be correct in most instances. So you see here, we have a policy. what it would look like. You see year one, we put in a total of $50,000 into the policy. And that's right, your cash value is $0. Year two, put in another 50. And you see again, your cash value is still $0 of available cash value to borrow against to use. And then you don't see any liquidity until year three or later. And that is $150,000. paid into a policy before you actually have any accessible money there. And that's going to be by design. This type of a policy is built primarily for the death benefit. So you see over here, we have a large upfront death benefit because that's what this is built for. It's not built for living use. The insurance company is charging your, all of that money is going towards it, charging higher costs early because the focus is on permanent coverage, not cash accumulation. So if someone asks, how soon can I borrow against my policy or how soon can I have access to the funds I'm putting in? And this type of design, the answer is you can't, at least not for a while, all the way to three years there before that happens. And so this would be not the type of design that you would want if you are wanting it for the reasons of early access into a policy. This would be a policy if you want to put in money and get an immediately I permanent it. death benefit. So see here that recap we put in year one, year two, finally in year three, we're going to have access to that money. So let's now look at what we would call here the and asset type of design, overfunded design, or simply a high cash value and accumulation policy. So this is the type of policy that's optimized for high cash value, early liquidity and cash accumulation, which... Most of the time, if someone calls into us, that's what they're looking for. Now, not everyone is looking for this, but most of the people watching this to learn more about this, that's probably what you are interested in. So here's the same $50,000 per year, but this time this is going to be structured properly. And by structured properly, I mean structured for someone who wants high cash value early on and early access. So really structured for the goals of the person that may. want this here. So instead of seeing zero now in year one, you're going to see your total cash value is just over $40,000. Now, most of the time here, you're probably going to see 40, maybe $45,000 at the end of year one, maybe slightly less. A lot of that can also factor in health, age, all that good stuff. But the key is here, you're going to have a high degree of liquidity in year one. And so that's the key difference here between the two. And remember, this is also the end of year one cash value. So in actuality, you don't have to wait that long. So you don't have to wait until the end of year one. But that value shown is the end of year value, what it would grow to over that year includes the dividend. at the end of that year in there. So it's really once the premium clears, insurance company applies the funds, you can typically borrow against policy within 30 days of starting. So you fund a policy within 30 days, you're going to have access to that money. Now, I've seen people borrow slightly sooner, but 30 days should be the expected window that you should anticipate. So that short delay times people last for why is it 30 days? Well, short delay allows company Got to verify the funds, make sure the check clears, their compliance, anti-money laundering, all of that stuff that they have to do. Once that's done, cash values credited and available that you can now take a loan from the policy there. So key difference between those two policies and that's the answer really is 30 days. Now, the other question is, well, how much of that can I actually borrow? So it shows that number there. And so the answer there is generally it is going to be around 90. percent or so of that end of year cash value. So that number shown there again, end of year value. So around 90% of that is what's actually going to be available within 30 days. So your first year cash value was 45,000. You could conservatively expect to access somewhere around, right around $40,000 within that first month. If it was that policy that we just looked at, $40,000 or so of cash value, probably going to be somewhere right around 36,000 that you can immediately borrow against to be able to use. And that is usable capital. You can get that, deploy it for really whatever it is that you want. And so real estate, business, debt payoff, anything that you have, or just the ability to know that you have that liquidity on hand. If it is something you're looking at, this is opportunity fund, an emergency fund, anything like that. Now let's really dive a little deeper here and talk about how these policies are designed to actually make that liquidity possible. As we saw one have a high early death benefit, but not very much cash value. And this other one, we see a lot of early cash value, but not as high of an early death benefit. So let's talk about the differences between there and really the design framework, again, for someone is looking to truly maximize that early cash value. So it's really just three E ingredients. One, you're gonna have the low base premium. This is the portion that. pays for the really a lot of times look at is paying for the actual life insurance. Now the other two components here are buying a debt benefit. But in general, this is what's going to give you that larger permanent debt benefit there. And we want to minimize this as much as possible as every dollar in the base that is going to give you less access to early cash value. It does end up giving you access to cash value, but it's going to have slower growth and slower accessibility there. We want to lower that to be as low as what we can possibly get it, which can depend on the company that you're at a lot of different things that we would have to look at there. And then we would also add a term rider. So you can add a small amount of term insurance or a lot of term insurance death benefit wise with a term rider that raises that total death benefit there. And this is the most efficient way to get that death benefit high enough so that we can put in the maximum amount of paid up additions that we want to. without violating any IRS limits. And we keep all of the tax advantages of that. So it's much cheaper to buy death benefit with that term rider so that we can get it up high enough. Because at the end of the day, we want to maximize the paid up additions. And so to do that combination of a low base term rider to boost up the death benefit, and then the paid up additions, this is the good stuff paid up additions. That's what's giving you that access to the early cash value, giving you the fast growth and what allows that. 80 to 90% liquidity in year one. So this is also the optional amount that gives you a lot of flexibility. So when you combine all three low base term rider, maximum paid up additions, you get a policy that's efficient, it's liquid and still compliant, keeps all the tax advantages and everything there. So now, even though every company may vary a bit, generally, the principle is going to be the same across the board. And it's really the structure and the design that is going to determine. the amount of early liquidity there. So hey, everyone, it's Justin Gartman, a wealth coach here at Better Wealth. And if you are a high earning professional, an entrepreneur or someone who just wants more control over your money, we are offering something called a clarity call. It's a one on one conversation with someone like myself where we are able to walk you through exactly how overfunded whole life insurance could help you build a safe, liquid tax advantage foundation for your wealth, no pressure or fluff. just real clarity on whether this strategy is right for you. So click the link in the description below or tagged comment and we'll walk you through exactly how we can possibly help you now. Back to the video. Now, when we design policies like this, it's because 99% of the time we are not chasing a high death benefit. So it's not someone coming to us saying, I want to buy this amount of death benefit. And we try to get that death benefit. It is truly we're chasing cash efficiency or cash value accumulation. So this means lowering that base as much as what we possibly can and then filling up the rest with paid up additions. so that it drives that early cash value faster access. So result, get all of those tax advantages, get the guarantees, get the long-term growth, but your money becomes usable capital. It also means that death benefit, while it starts off low and given enough time, it will catch up to a all-based policy. Even though that other one started off at 4 million, if you give it enough time and continue funding policy, this design for cash value accumulation, it will catch up to the death benefit of the other one. So. That is something to consider. And if death benefit is the goal, then there's going to be other strategies that you want to implement as well. Maybe it means a high cash value policy with some type of term insurance policy along with it. Combination of the two, there are ways that you can do that while still getting a high cash value policy. So then let's look at, well, why would you want this? So the people that are coming to us, you may wonder, well, that's cool that you can design a policy like that, but how does that help me? So let's. Zoom out for a second and say, all right, once you've built this kind of policy, you have this policy in place. Now, what can you actually do with it? Well, for the cash value, really, you can do whatever you want with that cash value. Now, there's things that will benefit you, things that may not be smart, but ultimately you can borrow against it. Whether it's to invest in real estate, so bargains, policy, help with down payments, costs, rehab, labows, whatever it may be. Maybe you get a big enough cash value. You can have enough to buy the entire thing. It just depends. Probably not early on, but especially if you've had a policy for many, many years could be something you could do with it. You can also use it for business opportunities. You can help buy inventory, have, keep the liquidity, lots of different things you can do there, or simply an opportunity fund. So you're a person, you're putting money into a policy, just waiting for opportunities to come. You know that it's liquid and it's there for you or for some type of emergencies. Now I'd say it needs to be real emergencies, not something that. washer went out, let's borrow from the policy. But true emergencies where you're in a tight spot would probably be the best use case of it there. It's also something that I know a lot of times we're looking at this, talk about how this can be used later in retirement, how this can be a great buffer asset. Well, if you're building up cash value accumulation, we want to build that up as much as possible too. So that's another use case of it as well. So all of that to say, that's the strategic applications of it. you can really use it for a variety of reasons. The key is that you have that money, that it is there and you can access it all while getting all of the other benefits of life insurance, such as the death benefit, such as some of the living benefits, the chronic illness, riders, the protection in that place as well. So to come back around, answer the question, how soon can you access your funds? Well, properly designed and overfunded a life policy, the answer is usually going to be. about 30 days, and it will be about 90% of that end of year cash value that's shown on the illustration. The key is understanding that not all policies are built the same and that early liquidity is a result of how it's actually designed, not some special feature, special type of policy there, but it's how it's designed. Now, can all companies design it the same way? Not necessarily. So that's why it's important to one, work with someone who knows how to design it. Also work with someone And. It has access to work at companies that we talk about all the time because those are the companies that you can really get the most efficient options and possibly the best options for you. And I'd say if you do want to see some real examples or run some numbers for yourself or just have other questions that you want answered, schedule a call using the link below. We'd be happy to get on the phone with you, answer those questions and see how we can possibly help. Thank you.
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