Whole Life Insurance is a product that has been used by banks, corporations, and the wealthy for centuries. Many have heard great things about it, but when presented with a Whole Life policy, the numbers look awful! Most Whole Life Insurance policies have $0 cash value in the first two years of a policy. Many Whole Life Policies described as “High Cash Value Policies” carry ~50-60% of your contribution in the first year and take 7 years just to break-even. While this is much better than the basic Whole Life policy – with $0 in cash value initially – it is unattractive to many and far from what banks, corporations, and wealthy individuals offer.
Then we have a true high Cash Value policy. If you have a policy set up in this manner, you will see the following:
- Immediate access to Cash Value
- 80-90% Cash Value of your contribution in the first year
- Positive Cash Value between 3 to 5 years in most scenarios
- Strong long-term Cash Value
We’ll refer to this as a 10/90 split. This entails allocating 10% of your contribution to the Insurance Premium and 90% to your PUA rider. The 10% premium is the minimum many insurance companies will allow one to carry. Another way to put it is that a company will allow us to pay 10X our premium into a policy per year. The main purpose is that it allows one to maximize the short- term and long- term growth of a policy. The article “How Can a High Cash Value Policy Benefit You?” will show you how a Whole Life insurance policy can benefit you!