Importance of policy design.
Touched about it earlier. As mentioned within the company, there are different products. There are limitations. The first one is an IRS limitation. Again, it’s still an insurance product. It has to be considered an insurance product in order for it to maintain its benefits.
You’ll hear it and if you exceed that it will become a modified endowment contract and it’ll lose those tax benefits. That’s something I mentioned earlier about MEC or the MEC. Then how you design the specific product, I think for IBC or at least for a lot of the investors there, the main goal is to have the maximum cash value.
The death benefit is a feature of the product and it does help with generational wealth and legacy planning as well. But as far as the main design efforts, you’re designing it for maximum cash value. And the death benefit is a secondary benefit from that. Versus traditionally, when you design insurance products, you’re looking at what kind of death, the maximum death benefit you can get for the smallest amount of premium. IBC turns that upside down and says, “how much funding do you want to put in for maximum cash value growth?” and the death benefit is a requirement needed in order to maintain those taxable or the favorable tax requirement.
And so it is very counterintuitive and this is why Dave Ramsey says that whole life is a scam. He doesn’t know the legal way differently. And then the other lever that you can play around with is you can make a policy where you get big, higher interest rates. If you’re doing like an IUL policy comes in order for her to be able to talk about today. That’s when you start to skew the policy more for higher returns, the stock market. But when you do that, then you give up what the whole point we’re doing that for, which is to maximize the cash value to invest in deals and stuff like that.
Yeah! One more part. I did add down there with flexibility especially with investors and maybe non steady income, the flexibility becomes a huge aspect as far as what you need to fund annually in order to keep the policy enforced. You want me to have some flexibility in that year to year to help you withstand maybe some of the unknowns or the maybe large capital events that happened if we’re investing in syndications, for example.