In a typical policy, we will settle on what your premium deposit should be for the first five years. This premium deposit will include a paid up additions rider that accelerates the growth of the policy.
In year six, you will then pay roughly forty percent less in premiums as the rider will have dropped off and no longer be necessary.
For example, if you are paying a premium of $10,000 for five years, this includes a $6,000 paid up additions rider so in year six, you’ll only make a deposit of $4,000 for the remaining life of your policy.
However, we recommend paying as much into your policy as you can. This being said, we recommend a one time dump in or extra deposit in year one. With the example mentioned above, if you had the means to deposit an additional $2-3 thousand with your premium deposit this would accelerate the growth of your policy even more. The best news is that it doesn’t affect your cash flow either as you’ll have immediate (within 30 days) access to all of this deposit as a loan from your policy.
Our goal with these policies is to get your premium as close to the MEC line as possible — the MEC line is the modified endowment contract line and is the maximum amount the policy will hold. Brent follows this policy of paying additional dump ins in the first year in all of his policies and recommends it to most, if not all, clients.
As we always say, there are specific situations with all of our clients and our Money Multiplier Mentors are trained to help you make the best decisions in growing your family’s wealth. When you meet with one of them, ask them about paying additional money into the policy in the first year and they can walk you through the specifics of this process.