12 Most Frequently Asked Questions
12 Most Frequently Asked Questions:
- How much is my max PUA?
Your max PUA will change annually so you will need to request a Status Report from our Service department to get a specific number. However, the rule of thumb is, at-least 1 to 1.5x your annual premium. Just e-mail email@example.com and include the following: Subject: Status Report Request – “FULL NAME”
- When can I stop paying premium payments?
You will need to contact our Service Department and request we run a “natural vanish in force illustration” to determine if you can stop paying premium payments. However, we recommend you contribute as long as you are earning income. Just e-mail firstname.lastname@example.org and include the following: Subject: Status Report Request – “FULL NAME”
- How can I check on the status of my existing policy?
If you’ve purchased a policy through Partners for Prosperity we can likely run a Status Report. Just e-mail email@example.com and include the following: Subject: Status Report Request – “FULL NAME”
- Where does my PUA go?
When you make a Paid-Up Additions (PUA) payment, approximately 95% goes to cash value, while the remaining 5% purchases additional death benefit. The purchase of death benefit is designed to protect your contribution to cash value from being taxed as a MEC.
- How is the Maximum amount of PUA determined?
Generally, your Max PUA is based on a MEC limit. MEC is a calculation of cash value as a percentage of Death Benefit. So, as cash value grows, so must the death benefit. MEC’s are tested annually with a 7-Pay actuarial test, not mathematical test – meaning the test cannot be duplicated on an Excel spreadsheet.
- How does a loan against cash value work?
The cash value works similarly to a CD in a bank and keeps growing. The loan is a separate transaction and is a lien against the cash value, just like a CD secured loan at a bank. Currently, Cash Value grows 2-3% above bank rates; Current policy loan rates are between 6-8% fixed or variable at 5-7%. It is possible to receive a lower interest rate than what the Insurance company can provide. Several institutions are willing to consider issuing a note collateralized by your insurance policy. Type “Lower my Interest Rate” into the search box.
- What is the rate of return of the dividends and the policy?
Cash value is guaranteed to increase every year by a dollar figure (not a rate). Dividends are not guaranteed, although Mutual companies have historically paid out. As of this writing (2018) the combined guaranteed plus non-guaranteed amounts are estimated around 6% (before commissions, cost of death benefit, and administration costs to run the Mutual Company). The combined net return is ranging from 3.5% to 4%. It is also important to note that once a dividend gets paid, it becomes a part of the guaranteed cash value, never to go down again.
- Why do I have to borrow to access my own money?
You don’t… you can withdraw (although you will lose the potential growth on that money. It is similar to a savings account – if you take the money out, it isn’t there to grow, however, if you borrow against the policy, your account keeps growing uninterrupted. The concept works if you pay the money back from monies invested into productive assets that generate a return in excess of the amount you borrowed. Simply using loans solely for consumption defeats the purpose of this strategy.
- How can I use my cash value to invest?
Find good investments that earn more than the loan costs…remember 4% to 5% is not a 1% return, it is 25%.
- How long do I have to wait before I can use the cash value in my policy?
- How do I use my policy as a stand-alone product during retirement?
Frankly, it doesn’t work very well stand-alone. It works better combined with other assets and left alone until all other assets are spent down. In your later years the policy can be used by taking dividends as income -first, then cash value, and then the death benefit. Type “Permission to Spend” into the search box.
- Will I be taxed during retirement?
It depends. Distributions up to your basis (contributions) will not be taxed. Amounts that exceed your basis are subject to tax.
How do I schedule a call for strategy and advice?
Schedule yourself on Kim’s calendar – https://calendly.com/kim-butler/30min.