What Happens If I Only Pay The Minimum On My Whole Life Policy?

How much monthly flexibility do I have with PUA payment on my whole life insurance policy? The answer is it depends on what life insurance company you pay. However, you can set a policy up to be extremely flexible. I'll give you a quick example. So here we've got someone who is interested in a whole life insurance policy. And he says the most I ever want to put into this policy is up to $10,000 per year. The base premium is set up to be minimized, to be precise, $910. He also has a term insurance rider attached. The cost is $290. When we add those two together, the yearly minimum premium is $1,200. And if he wants to pay that monthly, that comes out to $100 per month. Okay. Now his goal is to maximize the cash value. So the PUA rider is where the majority of that $10,000 is going to go. So just doing the math here, we've got $1,200 going toward the premium and the cost of the term. So we've got $8,800 going toward PUAs. When you add those together, that gives you the total of $10,000. His specific question is this. That $8,800, how flexible is it? Meaning, is it fixed? And am I required to pay that the same time as the other $100 per month? Or is it flexible? Because what would really be nice is if I could have a setup where I am only billed for this. And then when my cash flow allows, I can add this to the policy whenever I want. And it doesn't have to be the full amount either. Like I want it to be flexible. So it feels like I'm just throwing money in here. I see the cash value growing. I can get comfortable with it, test it out as I go inside. So you can do that. There are a handful of companies that allow you to do exactly this. Of the major mutuals, Guardian is one of them. So let's look at an example of exactly this with Guardian. So here's an illustration exported to Excel. And just to walk through this, first, we've got the minimum premium. So when I type out minimum premium, what that represents is the base premium of $910. And then the term insurance rider of $290. We are assuming that he only pays this. We're calling this the baseline plan. PUA rider, nothing forever. So what we've got here in blue is your total annual funding. This tallies up what you pay toward the minimum and the PUA. It's just the minimum. So it's $1,200 per year. So as we look at this, first year cash value, not so juicy, 115 bucks. And it takes a long time before he sees any gain on the policy. 25 years, not attractive at all. But he's planning to add more than this. So to illustrate an answer to his question, here we go. Here's the exact same policy. Assuming he starts with the baseline plan that we see on day one. But he adds lump sums over the year. So his question again was how much monthly flexibility do I have? What you see in the PUA column is just added when he wants. So in year three, he throws another $1,300 into the policy. He's paying the same $100 per month. It's 1,200 bucks per year. Add those two together. You get the total funding $2,500 for the year in blue, which accelerates the cash value growth. You see two years down here where he maxes it out at the $10,000 for two years. There we go. That looks great. He's accelerating the cash value growth. So this model is meant to demonstrate the flexibility. And again, his only commitment, how he would set this policy out is so he's only billed for the $100. And then he can add the rest when his cash flow allows. It's very, very flexible. Now, if he really wants to get fancy, he could do something like this where he puts a big old lump sum into the policy in the first year. As this policy is Guardian, they let you put in a big excess payment in year one. And he set it up with a high enough MEC limit to handle that. But my point is, look at that first year cash value. Check this out. Breaks even in about year three. And he can stop paying altogether there if he wants to. But this was just a model showing if I get $100K in and stop, what do the numbers look like? Here's what they look like. Anyway, to go back to his original question, how much monthly flexibility do I have with PUA? The answer depends on the insurance company. They all have unique rules. And it is important to understand those or for your agent to understand those and communicate them to you well enough where you know what you can and cannot do. But many companies like Guardian allow this type of flexibility where you don't have to pay the PUA the same time as premium. You can just add it whenever you want. Or you can use their online portal to set up automatic monthly payments and adjust them as you'd like over time, making it very flexible as well. So I hope you enjoyed this video. Let me know your thoughts in the comments below. And as always, I hope this helps.