In today's video, we're delving into the four fundamental ways to structure a whole life insurance policy, or what we refer to as the 'end asset policy'. Our approach covers the pros and cons of each structure, and I am thrilled to explore the numbers with you. We understand the desire to see numbers alongside philosophy, so we've brought in Mr. Dom to help set the record straight.
Four Fundamental Structures of Whole Life Insurance
- Typical Policy Design: This is a common design criticized by anti-life insurance advocates.
- No cash value early on
- Poor growth rate
- Lacks flexibility
- High commissions
While these criticisms may apply, we'll explore both sides to educate you on why such a policy may benefit some estate planning strategies.
- Max Funded Cash Flow Policy: This policy is geared towards maximizing cash flow, making your money work efficiently.
- Year one: $50,000 contribution, zero cash value
- Year two: Another $30,000, zero cash value
- Year three: $150,000 leading to a $25,000 cash value
In this example, the break-even point is Year 12.
- Front Load Policy: For those with significant initial funds, you can make a large upfront contribution with minimal ongoing payments.
- Year one: $300,000 contribution, $282,000 cash value
- Ongoing: $50,000 contributions
This setup allows over 94% cash value and expands your financial options.
- Convertible Term Insurance: If you cannot qualify for or do not need a whole life policy immediately, consider a term insurance policy convertible into a whole life policy.
This approach is appealing for maintaining flexibility and covering your needs as your financial situation evolves.
Considerations When Choosing a Policy Design
- If your focus is on estate planning, a typical policy can be advantageous.
- If cash flow and flexibility are paramount, a max funded policy is better suited.
- Front load policies are ideal for those with significant capital who require little to no growth-related flexibility in succeeding years.
- Convertible term insurance offers a stepping stone toward whole life policies for those not immediately qualifying.
If you have further questions on selecting an insurance structure that best suits your needs, please reach out to us. Our team is ready to assist you in crafting an optimal financial strategy.