This content was created by Jayson Lowe. This content was uploaded by Jayson Lowe. This is a YouTube video titled "The Secrets to Paid Up Additions In Canada" created on November 17, 2021, discussing the concept of paid up additions in whole life insurance policies, their benefits, and how they can be structured to grow cash value and death benefits over time.
Okay, we are going to have a great conversation about this incredible thing called paid up additions. What exactly are these paid up additions? How do they work? Why are they so important when you're looking at putting together and structuring a participating dividend bank whole life insurance policy? And how can we put them to work for your benefit? If you're thinking about, you know, getting involved or doing a policy like this, how can these, you know, critical components become a huge advantage to you as a policy owner moving forward? So we're going to take a look at that. We're just going to fundamentally look at a couple key components. So we've got basically a chart. What we're looking at is a starting age. And it doesn't matter where you're starting. You're 0 years old or you're 60 years old or you're 50 years old. However you are in life, doesn't matter. You're starting here. Age 100 is way out here. Okay, so here we've got age 100. Well, we have to start with a initial contract, an initial death benefit value. This is all going to be determined when you customize a program with your advisor. And we spend. Advisors who focus on this type of work tend to spend more effort on looking at the deposits going in. So what are you going to put into your program? But just for the sake of our example, I just want to keep it very, very simple. Let's just say that we have a $200,000 starting death benefit policy. Okay. The number doesn't really matter. I just want to pick a number that we can work with. So that's the initial starting contract that we get for the individual. Now that was determined based on what the individual, the owner, the policy owner decided that they wanted to contribute into their program. Okay. So for the sake of our example, just gonna try and keep the numbers very simple. Let's just say it was $10,000. That's the number that the owner decided, yep, this is what I want to deposit into my program to start building cash values, et cetera. Now out of that, you know, there's a breakdown between that $10,000, 5,000 is the minimum in this case, again, just keeping the numbers very simple. That's required to get the initial original starting contract value. Okay. So if you're older and you're putting 5,000 in, well, you might not get as much death benefit. If you're younger, you'll get more death benefit. Okay, Very simple. And then we have an additional value here. I'm going to call it the top up or the PUA premium paid up additions. Again, PUA stands for, you know, those paid up additions that are available on the contract. Now that's going to go and it's going to go automatically up here and it's going to buy a brand new chunk of death benefit called a paid up addition. Very simple. So for the sake of our example, I know the graph isn't very well drawn, but let's just keep it. I want to kind of illustrate the building blocks here. Let's just say that that bought us an example amount of death benefit. Our $5,000 here accumulated a paid up block of insurance, fully paid for of $20,000. So we have the initial block, the original basic contract, the base policy, we would refer to it, and we're putting 5,000 every year for the purpose of having that it'll grow cash values, et cetera. We've structured it so that our deposit, which we chose has flexibility in it. Totally optional money that can come in here and it can buy a fully paid up block of extra coverage. So we now have a new death benefit right here of $220,000. Okay, here's the key fundamental. Why is that important? Well, these policies have the ability to earn dividends, which is a wonderful thing. And the dividends that we receive on an annual basis when they're declared by the life company, they're not guaranteed, but they're very consistent. And they've happened for a long period of time. But when they are declared, they're declared based on what's already happened in the policy. So if the policy owner overfunds this policy, they accumulate a block of paid up insurance. That block is then going to also have the ability to earn dividends going forward. So I'm going to kind of use my own rudimentary drawing here. Let's pick a new color. And so that adds a block of a dividend insurance. Here again, another paid up addition block. That was done by the dividend. Now I don't know what the dividend was. Again, we'll just try to keep the numbers very simple. Let's just say we got a dividend of 1,000 bucks. Well, it bought us an extra block of coverage that was, we'll say it was 5,000. So now in one whole year, we've increased the total death benefit from 200 to 225. We did a portion of it as the owner and then the dividend that receipt we received was larger because of our effort and it also increased those blocks. So then we're Creating these building blocks, growing up as we move forward in time. So now the very next year, we're going to go ahead and basically duplicate that process. So here we go, we overfund the policy again. We get another one of these blocks up on top. And because we have that block there, well, now we also get another dividend. And so the following year's block, let's just again, keeping it very simple, let's just say it's 25,000 of paid up insurance. Now we get a dividend that's $1,100. And so it buys us, let's say 7,000. Well, you know, I'm going to keep the numbers simple. It's going to make it 10,000. So now again, we're into year two. We've increased the size of our block, which has increased and pushed the dividend out. And so we create this constantly growing kind of machine. As the death benefit goes up and up and up and up and up. Fundamentally we have to understand why that matters. Well, here's why that matters. The cash value. The cash value, which is an asset, it's a growing pile of capital available for the policy owner that is fundamentally required to grow to chase after, chase after, chase after the death benefit of the contract. Very, very important. So what ends up happening is we create a machine in relationship to the growth of the cash value that basically does this.
It accumulates and accumulates and it grows the cash value and it's constantly rising and rising and rising and rising. To chase after the death benefit becomes a very efficient machine. It's a highly liquid type of an asset class. So as you're building that capital pile, you can access money to put it to work in other areas of your life. And so fundamentally, that's what paid up insurance is all about. Paid up additions, they're the building blocks of a whole life policy that create cash value. They're very powerful tools and we'd encourage you to learn more about that. Go ahead and register for our on demand class and take a look, see if this is the right fit for you and if it's something that perhaps, perhaps you can learn a little bit more about it and decide if this is the path that you want to look at taking on something new financially in your life. Again, paid up additions, powerful tools really encourage you to learn more about them and see if incorporating them in your life can be a benefit. Go ahead and register for our class and we look forward to seeing you on the other side.
