A New Kind of Life Insurance

{5 minutes to read}  Today, I want to talk about a new life insurance product that has recently come out called a 12 Pay Whole Life Contract. In the illustration attached, you’re going to see $100,000 contributions going in for a 45-year-old individual for 12 years. This is a permanent life insurance policy that can never expire and has limited payments so that at the end of the 12 years, you have a paid-up life insurance policy.

Also, the unique nature of this type of whole life policy is that it is a very high cash value product. So, at the end of the 12 years when you’re done paying, not only do you have more money in the policy than you paid, but you have an increasing death benefit and the ability to use this policy to leverage how much you want to leave to your heirs and loved ones, and how much you want to take out of the policy to use during your lifetime. So you can balance between how much legacy value and how much of the policy you want to use for your lifestyle.

What I wanted to show is that with the unique nature of this type of product you could, let’s say, at retirement, as illustrated below, take out all the money that you paid into the policy at the end of the year you turn 65. At the beginning of the year you turn 66, you took out all the money that was paid into the policy. Now your cost basis has been recovered and you didn’t pay any taxes on taking the money out, but you still have a policy with $850,000 of cash value and $1.7 million worth of death benefit.

The story gets better because even after that money is withdrawn, the cash values and death benefit continue to grow (based upon non-guaranteed Dividends and loan interest rates) so that if this individual would pass away at let’s say normal life expectancy age of 87, the death benefit would grow to $3 million, which is more than what the original face amount of the policy is. Pretty good performance for a life insurance policy.

Now, where can that be utilized? Think about where people are with their retirement if they were retiring today. Well, the one thing we never want to do is withdraw money out of the stock market when the market is down. So, the life insurance policy creates this volatility buffer. You could use the policy’s values where here we illustrated taking $1.2 million out of the policy. But instead of that, maybe you take out what your expenses are, maybe $100,000 a year for the next 12 years. This will allow you the flexibility of not being forced to withdraw from retirement accounts like 401(k)s, profit-sharing plans, and employer-sponsored pensions that you don’t want to withdraw from because that will lock in a loss. When the market is down, we don’t want to take money out of these accounts.

So, this is a great new type of life insurance contract. If you’d like to learn more about it, let me know and we’ll be happy to show you how this might be something relevant to your family situation.

One other point — with these types of policies very often we will add a feature that allows you to use the death benefit while you’re alive, to pay for care that you may need if you cannot do two out of six activities of daily living or you have a cognitive impairment. So, the policy not only can provide protection against death, but it also can provide protection against long-term care, and help you with your retirement income planning by having access to the cash value.

Three very distinct benefits: death benefit, cash value, and long-term care. To learn more, give us a call.

12 Pay Whole Life Contract

Registered Representative offering Securities through American Portfolios Financial Services, Inc. (APFS) Member FINRA/SIPC. Investment Advisory Services are offered through G&G Planning Concepts, Inc. which is not affiliated with APFS.  Strategic Wealth Advisors Network and Gassman Financial Group are not affiliated with APFS.

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