We often get asked, what is the best way to design a policy? You may have a policy and you want to know, like, is my policy properly designed? And a lot of people come to us, Alden, wanting to know exactly what they should do. Should they do 40-60? Should they do 10-90? What type of company should they use? You just did a video breaking down six carriers. You looked at a ton of different numbers, hundreds of thousands of dollars of difference. Why don't you just give them a quick preview of what they're in for when they watch this video? Well, at face value, what we're starting with is I'm pulling up a design that got sent to me to review $750,000 a year for multiple years and then dropping premium. This is with a good carrier, mutual company, 40-60 design. And so what I showed is, hey, what if we built this a different way at the same carrier with all the same riders, but just a different ratio, right? This is the 40-60, 10-90 conversation at its best. What we see is a dramatic increase in cash value, performance, flexibility, and peace of mind. But Dan and I chose to take it a step further and said, okay, if we could do this here, can we do it at six other mutual insurance carriers? And the answer is yes. And the answer, as you may see, it might surprise you how much efficiency we can generate. So for all the life insurance nerds, you're going to love this. And for the people that have insurance policies and you want to know, is this the right fit? Check out this video. There'll obviously be links down below if you want to learn more about what we have to offer. We do policy reviews and all, but all then thank you. And let's, let's dive in. Today, we're going to look at an emeritus policy that was sent to me to review. And I found it very, very interesting. And so the long story short is we rebuilt the policy with emeritus to have a more competitive growth. However, ultimately the client decided to go a different direction and I'll, and I'll show you why. So come check this out with me. Here we go. So first things first, I'm going to show you the original emeritus illustration. So on your screen now is how this policy is structured. So Emeritus, Emeritas, I don't know how to say it. Somebody tell me in the comments, please. They've been around since 1887. They are a mutual insurance company. Comdex rating, as many of you know, is kind of a conglomerate score, right? It's a score that says, where are these guys as compared to all the other insurance companies out there? Emeritus falls in the 79th percentile. So that means that they are, on average... financially stronger from a stability standpoint than 79% of the insurance carriers. So not a bad company at all, but we typically stay around the 90 to 95% mark if we want to work with the highest quality companies as we can. That being said, Emeritus does have a very strong product and is very popular among infinite bankers. Now looking at this design, I just want to show you initially, we're looking at $300,000 of premium that's buying whole life insurance. We have then almost an afterthought of about $1,500 per year, which is buying term insurance of just over a million dollars. Now, for those who watch the channel a lot, when we're building a cash value policy, the reason for the death benefit is one, it's life insurance, you got to have it. But two, having a certain death benefit justifies to the IRS the ability to shove in a certain amount of capital. And so for this gentleman and this policy, he is 50 years old, If we scroll down. So the total amount of premium that can be paid into this policy is just over $750,000 per year. So if we look at this design, we've got $750,000 going in the first year, all the way over the right-hand side, the other red line here, that equates to about 63% of the first-year premium in cash value. So why is it so low? It's really because how we're buying that death benefit in this policy that we reviewed is the most expensive way possible. When it comes to how we design policies, which I'll show you in a moment, we want to get the insurance cost as low as possible, which was done here, but also do it in the most efficient cash way possible, making the premium for that amount of death benefit as low as we can. So when we look at this policy, it breaks even out here in year eight. And what's happening in the illustration as we've got 750 for four years. $300, which is all base premium for the additional three years. And then we're doing a reduced paid up election. That's what the agent illustrated. The goal for this client was to build cash value quickly to give them the best long-term performing policy that they did not have to continually pay into. So after eight years, paid up, death benefit drops by about half, still double the premium you've put in and it continues to grow from there. primarily based on that dividend that gets paid every year. So when we look at this insurance policy, all things being equal, this is not a bad design. It just could be a whole heck of a lot better. Well, we're giving up by buying so much whole life insurance. in the very first year is around $200,000 of cash. So now I'm gonna bring up on your screen the same product, same company, but built differently. So in this first year, you'll notice that premium is the same, 750. Cash value all of a sudden has increased by basically $200,000, about $170,000 more cash in this policy. If we did a side-by-side comparison, which I'll show you in a second, you'll notice that that death. benefit in the first year is basically identical. So what's changing? When we go back up, all of a sudden, these dollars are different. The amount of whole life insurance we're buying, instead of basically $10 million, we're buying three. Instead of one and a half million of term, we're buying eight. So by switching how we're buying the death benefit, all of a sudden, the premium, the cost for that insurance is drastically reduced. So scrolling back down here. First year cash value, it's a big difference. It's like I said, almost $200,000 a difference. Now that cash value is there above 3.6. So we're breaking even two years earlier, still have the same payment outlay of seven years. Policy is RPU'd or reduced paid up in year eight. So the question is, why do this instead of the other one? Well, the obvious one initially is you got a whole lot more cash early in the policy, the first year in particular, but every year thereafter also. But the devil's advocate would be perhaps, hey, what about that big death benefit drop? Doesn't it look worse because you're not buying as much insurance? It's a good question. Let's look at it. So here are those values side by side pulled directly from the illustration. On the left, this is what's currently being advised. This is the rebuild. You notice the death benefit the first year, basically identical, right? This one on the right hand side actually grows more quickly because We're buying paid up additions and a larger amount of them driving that death benefit up more quickly. After seven years, no more premiums are due. That death benefit is reduced. But again, notice, because we're building it differently, buying more paid up additions and increasing the compounding, over the course of this policy, that death benefit will always remain higher than the original, as well as that cash value. It will always remain higher than the original. because we've added more to the compounding base within this policy. So I took these numbers back to the client and we had a conversation. It was effectively, hey, that's great, but is Emeritus the best company? That kind of remained to be seen until we started running numbers. So let me show you even more. What we have here is six insurance companies. We have Emeritus, MassMutual, Guardian, New York Life, Penn, and One America. So a lot of numbers on your screen, but to bore all the details, unless you want to hit pause and look at all the numbers, I'm going to zoom or scroll down to a specific chart that is only looking at the cash value for each of these policies. What we're going to see, which we see quite often across the insurance industry, is that right now in this space, we have Guardian usually has the highest first year cash value. Another carrier, which is not displayed here, Lafayette Life, usually has the highest, second highest first year cash value. But when it comes to long-term performance, that's a different story across the board. So first of all, that's a pretty big difference, right? So even from emeritus to emeritus, it's almost $200,000. And as we look at emeritus to literally any other carrier, building this policy efficiently, correctly, in my mind, giving the client more flexibility, more options, better cash value performance, higher death benefit. Somebody tell me why this is a bad thing. There's a lot of very traditional IBC practitioners out there that choose the 40-60 model by rote, by default, and then build policies that limit the ability to fund more than the maximum premium. If I'm going to build a 40-60 design, your policy is going to have a larger upside beyond what I'm showing in premium because you're buying for that amount of insurance. You're going to get more opportunity to fund that policy. The one we just looked at didn't have that option. The maximum was that 750 number. So when we're rebuilding these with all these insurance carriers, we're getting over $600,000 at every single carrier, at least $140,000, $150,000 of additional cash in the policy the very first year. Over time, you can see that trend continue. So just to snapshot, fast forward 10 years, take a look at those numbers. We still maintain higher cash value with every single policy. I realized that looking at numbers on a screen and on a chart can get confusing because there's so many of them. So put another way, let's look at this from a line graph perspective. So the current emeritus cash value, that's the very bottom blue. you can see how it effectively stays as low as it is for a very long time. It stays as the worst or second worst cash value performing policy out of all the ones we looked at. The highest initially, which is the orange color, is giving us the highest cash value the very first year. It's effectively $660,000 in cash value versus $460,000 in cash value with the current design. So given the same premium over the next seven years, that policy then is just growing and kicking based on solely the dividend and the guaranteed interest within the policy. So as you can see, Guardian remains pretty much the best competitor all the way out to year 10 when it does switch with Penn Mutual. We talk about Penn Mutual quite a lot on the channel. And one of the reasons for it is it has the best long-term performing policy of any carrier in the industry right now. And that's because of the way the product is built. There's also some additional flexibility in there that some carriers don't have. So when we look at this, we can see all of the other products, every single one except for, unfortunately, One America, has a better performing long-term policy when we build it differently at any other carrier. To get a comparison on the death benefit, we ran those numbers as well, just pulling directly from the illustrations. We can see that they all start around that similar number, somewhere between 12,000 to 14,000 with MassMutual. They will grow, and then they will dip. And once they dip, when we do that RPU, they're going to continue to grow from there. Now, looking at all these numbers, again, they get jumbled, they get confused. But point being, all of a sudden, that current design for Emeritus is the lowest performing death benefit as well. And take this a step further, looking at cash value percentage difference in the first year and lifelong, this is saying, if Emeritus is a one, what's the percentage between that one all the way up to where the competition is, right? What's that percent change. With Guardian in the first year, it's basically 40% difference. So it's a much more efficient policy. But even on the low end, with Penn Mutual being the least efficient in the very first year, it's 30% greater cash value in the first year. 30% more of that cash is available to that policy owner. As we trend that out, we see the same thing. The trend continues and the efficiency just continues to shine with Penn as well as other carriers. Now this to me, when I looked at this, this was very, very interesting. And one of the reasons I say that is because we hear quite a lot, if you look on infinite banking practitioner websites, some of the more traditional IBC practitioners, and some more conservative whole life salesmen as well, we see claims such as buying base, all whole life insurance is more efficient than buying paid up additions. So let's break that down slightly. Why do they say that? Well, first, buying base, all base insurance, all the costs are already associated and built into that premium, right that premium is guaranteeing a certain amount of death benefit and the dividend is going to be driving that death benefit to increase over time as well. Okay. Paid up additions, there's an extra cost. It's called a load fee. So every insurance carrier has a load fee associated with their paid up additions. And actually Ameritas, ironically, is one of the ones that does not in certain circumstances, but I won't go there. So load fees, they take away a percentage of your premium as a fee. Every premium you pay into a PUA a percentage of that is taken away. On average, 10% the first year, 5% for subsequent years. It's kind of what we see across the marketplace. So when we take that into consideration, we have base premium versus paid up additions. Well, of course, in that comparison, we can say base premium is more efficient because there's no extra fee being taken out of it. But we forget the fees are already calculated. They're all in there. They're just not as transparent as a PUA load fee. Okay. That's the first thing. One of the things that I found interesting is every carrier say for Penn Mutual in this case, every carrier, the difference in cash value from the original illustration from Emeritus to the additional illustrations that I built, the efficiency technically is going down over time. And that is partially because of this load fee, right? And so we have this kind of situation and over time, the base premium will acquire a larger dividend over time than pockets of death benefit that's purchased through paid up additions. So we have this decline. Now stop. Before we make any big assumptions out of this, we have to remember, we can't look at each one of these things in a vacuum. It just doesn't make any sense to do that. If we have all the numbers in front of us showing that by using paid up additions, by using less base premium and putting more money toward flexibility in paid up additions, all the data says that is the more efficient way to do it over the long haul, the lifetime of the policy and immediately. It doesn't matter if technically the base premium is more efficient. because there's less fees that come out of it, right? The PUA low fee is less efficient, is what they say. It's not the case, because you have to look at the whole picture. the entire picture to be able to make a claim like that. I think when we get too granular, all of a sudden things become less clear. We've helped people unlock millions of dollars in hidden value just by reviewing their old life insurance policies. Unfortunately, thousands of people do not have life insurance policies set up properly, which could be costing them a lot of money. If you have a policy, the few minutes it takes to fill out our form could be the difference between continuing to waste money or unlocking serious value. If you qualify, we'll review your policy 100% for free and give you the honest breakdown you deserve. Click the link in the description or take comment below to apply. Back to the video. So last thing as well, death benefit chart difference, kind of all over the place, but very similar concept to what I said on the last chart. Over time, the whole life product, all base premium will be more efficient trending wise than the other policies. But when you look at everything, not granular, but from a snapshot. We still have a higher death benefit in every other policy, again, except for the One America policy. Jumping back into here, the no-brainer, if we're looking at the highest early cash value, is Guardian. We have the highest cash value with Guardian basically for the first decade. I think if we went forward with this policy, that's a great policy. Why not do that? Whenever we look at numbers, and any of the clients that work with me kind of know, I don't love illustration battles. one of the reasons for this is because how the product functions is, in my opinion, much more important than the shiny numbers on the screen. So here's a classic example. New York Life, the second largest mutual insurance company in the world, I believe, maybe just in the United States, don't quote me on that. They have a fairly good performing policy. Over time, cash value, when built correctly, will actually be very strong because they have a very strong dividend. But what about that paid up additions writer? How flexible is that year to year? Part of the problem with New York Life's whole life product is that their paid up additions writer, if you don't pay the full amount every year, they start to take away the ability. So for the first 10 years, you can pay 10 times the base premium in the first year, nine times a second year, and so on. And so every year you lose ability to pay more paid up additions if you don't maintain the maximum premium. So said another way, if I'm putting in $100,000, my minimum premium is 10, that extra 90 I'm putting in, I can do that the first year. The second year, if I can only come up with 50, that's okay. I could technically put in 90. Starting that third year, fourth, fifth year, all the way out, if you don't make the maximum premium that was underwritten, that was approved, they start lowering the possibility for you to fund additional premium. This is a big, big deal. This is one of the reasons we don't do a whole lot of business with New York Life, even though they are one of the top four mutual companies in the United States. Number two, in fact. Guardian, similar issue. They have a 10x multiple as long as you have a certain term rider on there. Well, that certain term rider gets more expensive every single year you're alive. So maybe that's not the best long-term funding strategy. And this shows up in their long-term performance not being as strong because that cost of insurance is higher and increasing as we fund the policy. One America has its own rules. Penn Mutual has its own rules. Mass Mutual has its own rules. And in my opinion, Mass is one of the most confusing paid-up additions carriers because they have two. They work differently. One of them... you really don't want to mess with. The other one, you kind of want to mess with it, but they also take away funding privileges similar to New York Life if not funded adequately. So here we are. You asked the question to me, Alden, what's the takeaway here? I'm so glad you asked. Let's land the plane. When it comes to life insurance, we can look at illustrations and tell everybody's blue in the face and we're yelling at each other and saying, this carrier is the best because it has the nicest numbers. That's not always the best thing to do. Take the New York Life PUA restriction. If they had the best numbers, everything was amazing. Everyone would want that product. But very few people would realize, oh, there's a lot of limitations with this. Maybe that's not the best decision for me personally, because I want flexibility. So my goal in saying all this, guys, the takeaway is if you're being presented policies that A, you don't understand, B, do not look like they're designed well, and C, are the traditional 40-60 design with no additional upside. it might be worth having a second look or a second conversation. This product was actually sold many years ago. It was about a three-year-old product, and we ended up doing a 1035. So we changed that into a brand new policy. Let me know in the comments what carrier you think we went to and why, and I'd love to dialogue with you there. Take care.
.png)