Whole Life’s Guaranteed Growth and 4 Ways to Accelerate it for Banking

2 – Add a Paid-Up Additions (PUA) Rider

If you are not ready to commit to the structured accelerated premium structure of a Limited Pay Whole Life policy, most Mutual Insurance Companies offer some version of a flexible PUA rider. PUA stands for “Paid-Up Addition,” which actually allows for additional paid-up life insurance that you can add to your existing Whole Life insurance policy. Click here to read all about PUA’s.

With PUAs no underwriting is necessary and no ongoing premiums are due. They are like little mini Whole Life policies that are paid-up in one shot and stacked upon your existing policy.

Now many of you are thinking, “That’s great, but I don’t want additional insurance. I just want to accelerate the growth of my Whole Life policy.”

Well, if you want to pay additional payments into a Whole Life insurance policy to accelerate its growth, those are technically premium payments. And what do premiums have to buy? Yep, more life insurance.

But guess what? This is the most efficient type of Whole Life insurance you can buy from a cost standpoint. Usually 90%-95% of that PUA payment goes straight to your guaranteed cash value and only 5%-10% pays for the additional death benefit. On that new little block of insurance, no additional premiums are due, hence its name “Paid-Up Addition.”

Remember how your guaranteed cash value must climb toward your death benefit each and every year? What do you think happens when you raise the bar…the death benefit bar that is? Your cash value must now climb even higher to hit that new higher death benefit target.

Remember how “more-in-sooner is better?” You just identified a strategy for jamming additional premiums into your Whole Life policy where 90-95 cents on the dollar goes straight to your cash value. And that cash value must converge upon your death benefit on a guaranteed basis. And you also just increased the total death benefit figure that your guaranteed cash value is climbing towards.

How do you like Paid-Up Additional insurance now?

When our same 38-year-old male makes additional premium payments to buy PUAs (Paid-Up-Additions), these little paid-up policies stack upon the initial death benefit to accelerate both the Cash Value and Death Benefit.

Still unclear about Paid-Up Additions (PUA)? Click here to read an entire article about using Paid-Up Additions (PUA) to stack your growth inside a Whole Life policy.

However, it is worth noting that you are limited to how much in PUAs you can buy in any given year both by the insurance company and by the Internal Revenue Service (IRS).

Let me explain:

All insurance companies have certain limits or ratios they allow for when it comes to how much in PUAs you can stack on top of your underlying base Whole Life policy. Think about it, it’s the least profitable part of their business. They are only collecting 5-10 cents on every dollar for mortality charges and then agreeing to grow your other 90-95 cents every single year on a guaranteed basis. Not only that, but they are giving you even more death benefit that’s fully paid up, so unless you cancel it, they have to pay.

As far as the IRS goes, remember that they are agreeing not to tax your cash value growth since you are alleviating some of the Federal Government’s burden of caring for widows and orphans. But once you cross their line in the sand (when your policy becomes too lopsided with cash value and not enough death benefit) the IRS will revoke many of the key tax benefits normally associated with Whole Life insurance.

Ugh, you don’t want that. The next section discusses a handy workaround that allows for maximum overfunding while staying compliant with insurance companies and the IRS.