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Paid-up Additions and Cash Flow

Paid-up Additions and Cash Flow

 

 

Paid-Up Additions

Paid-up additions are secret ingredient to Cash Flow Life Insurance. It turns the policy into a supercharged savings account. Without it, you just have another improperly designed policy that doesn’t deliver any real living value to you or your business.

 

What are paid-up additions, and why does it matter? Paid-up additions, which we will call PUA for short, are the cornerstone of Cash Flow Life Insurance. This is the policy rider that allows investors to funnel additional cash directly into the net cash value of their policy, which they can turn around and tap into to generate sources of cash flow to enhance real estate investing. Investopedia defines PUA as a rider available on a whole life insurance policy, that lets policyholders increase their death benefit, but more importantly, the living benefit by increasing the policy’s cash value.

 

Paid-up additions themselves then earn dividends, and the value continues to compound indefinitely over time. This allows the policyholder to take tax free loans from the policy, which can even be used to pay the premium for the policy.

 

With traditional life insurance, you will see a zero dollar cash value in year one. With a properly designed cash flow life insurance policy, you actually see a large cash value in year one, and this is the power of the paid up additions rider. Traditional life insurance doesn’t work for a living benefit because you don’t have anything to work with on day one.

 

Cash Flow Machine – Policy Loans

Your whole life policy, contractually, gives you the ability to take out loans at pre-determined interest rates. So how does this system really work? Cash Flow Life Insurance allows you to be your own “bank” by swiftly borrowing cash for anything you need without the aggravation of a loan application and no exasperating credit check. Your cash flow is not “locked up” like most retirement accounts. You can quickly access and use your cash flow any time you want for any situation. Cash Flow Life Insurance acts like a reservoir for your money that automatically builds up a cash for needs such as real estate investing, vacations, business needs, or tax-free retirement without having to “cash-out”, so you won’t trigger an expensive capital gain. The exponential growth curve of compounding interest, that is to say, the sequence of returns doesn’t get interrupted when you take that money.

 

With Cash Flow Life Insurance, you can access this cash flow for any purpose using rapid access, easy loans while your cash continues to grow and grow. These loans from your “bank” are private, do not have a structured loan repayment schedule, and do not require high credit scores or annoying credit checks. You can control your cash flow and access to capital. Think of it this way. If your revenue drops by 40% in your business, banks won’t lend to you. But if you have a cash-rich Smart Reserve System, you can avoid that and instantly have access to capital. This allows you to receive periodic cash flow completely tax-free regardless of age, with no penalties.

 

When you take a policy loan from your cash-rich life insurance policy, you are borrowing from the life insurance company, not yourself or your policy. This is known as non-direct recognition. This policy loan you are taking from the life insurance company itself has collateral, particularly the guarantee that you will pay back the loan. The collateral is the cash surrender value in your life insurance policy. With cash rich life insurance, you are building up wealth in the cash surrender value of a properly structured, dividend paying, whole life insurance policy. As the cash surrender value rises, it also increases the sum that the life insurance company is prepared to give to you in the form of a policy loan. When you want to make a major purchase, like a house or a car or boat or whatever it is, instead of going to complete strangers like a banking institution, you take out a policy loan, acting as the collateral.

 

Policy loans are more desirable than using banks. The life insurance company is contractually required to give you a loan at a pre-defined rate of interest. You don’t have to explain the reason for the loan to the life insurance company. They aren’t going to check your credit. They aren’t going to check your annual income. They are not going to question you when you will pay the loan back. They don’t care if you even pay it back, which is the complete opposite of working with a bank. When you take out a home equity line of credit with the big banking institutions, your house acts as the collateral. In principle, even if the home equity over-collateralizes your mortgage, the bank is still at peril, because the real estate market could decline rapidly, or you could let your home value decline by not taking care of it.

 

“What a peaceful, stress free way of life it is when you get the Banks out of your life!” -Nelson Nash

 

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