When clients think about life insurance and think of it as straight cost, I certainly understand. We are always bombarded with different types of insurance that we need to buy in our life and people feel “insurance poor”. Clients are insuring their car, house, health, and even their blackberry’s now too. If you don’t use those insurances you never see any benefit.
The truth is with whole life or universal life, is that it is beneficial to put as much money as you possibly can in them. The IRS has put a ceiling on how much money you can put in a policy on an annual basis called the MEC level. MEC stands for modified endowment contract and once a policy becomes a MEC it is taxed differently. A MEC makes all of the growth in the policy be taxable. If the client keeps the contract within the limits then the cash value will grow tax deferred. The IRS put a limit on it for a reason.
Most clients struggle with the idea of paying more than the minimum amount. While the minimum amount will generally suffice in keeping the policy going, it could be so much better. How many financial tools do you have in your portfolio that increase in value everytime you put money in? Not many right? In fact, the more money you put in the better it will be.
This can serve as a large paradigm shift for a lot of folks. If you can see more than cost, you may be able to see the beautiful possibilities.