As long as you are healthy enough to qualify for life insurance and it is affordable, you can buy a policy that will build cash value. Talking to a financial planner about your affordability, current assets and additional retirement assets that can be funneled into a life insurance policy is the first step. When the purpose is to accumulate cash value quickly, a PUA or paid up additional rider to your policy may be the best way to go.
Paid up additional insurance riders provides:
• More protection for beneficiaries
• Additional cash value which can also be used for college educations
• Tax-deferred values is the policy is not a Modified Endowment Contract
• The flexibility to add the rider at time of issue or at a later date
• The flexibility can also be used for mortgage protection and acceleration, wealth transfer and as a supplement to retirement
• Possible dividends
Here is an example of how the policy works with the rider. You purchase a rider with an annual payment of $10,000 with an initial face amount of $225,206. By the end of the first year, your cash value is $6,020 with an annual dividend of $67.00 dollars. At the end of year five, your cash value is $44,934 with an annual dividend of $724. According to Mutual Trust Financial Group, guaranteed net cash value grows almost four times the annual premium by year five.
Although the guaranteed death benefit is initially generally smaller when a PUA rider is added to a policy, by year 25, it exceeds the guaranteed death benefit of the base policy.
Life insurance is one of the most effective ways to transfer wealth at death because it provides an income tax-free death benefit that is paid directly to the policy beneficiaries in cash.