[00:00:00] John Montoya: Hello everyone. This is John Montoya, and

[00:00:04] John Perrings: this is John Perrings.

[00:00:06] John Montoya: We are Infinite Banking authorized practitioners and hosts of the fifth Edition. Episode 66, PUA Writer Basics. In this episode, we're gonna talk about paid up edition writer basics, the design principles behind it, and also priorities when it comes to making a decision on how to pay or when to pay your PUA.

[00:00:32] John, let's kick this off.

[00:00:34] John Perrings: Yeah, let's kick this off. And as I mentioned last time, I recently attended the annual Infinite Banking Think tank, the annual conference that the Nelson Nash Institute puts on the Nelson Nash Institute. Of course, being the organization that is the, really the source material for all things Infinite Banking.

[00:00:55] Conference, one of the themes we were talking about was gaining some clarity [00:01:00] on what's really happening out there and overcoming a lot of the noise that you see in the financial industry in general. And then more specifically and more recently with a lot of the people that talk about Infinite Banking, A lot of them are not.

[00:01:14] Authorized practitioners, they don't actually understand the mission that we're on. And one of the biggest problems that I see out there is the way that a lot of the folks on YouTube, TikTok, et cetera, talk about the PUA writer. And We thought it would be a good time to dig into that a little bit and reiterate some of the basics of the PUA Rider and really understand what's going on with the PUA Rider.

[00:01:38] So first thing about the PUA Rider, what is a PUA rider? It stands for paid up additional life insurance. PUA paid up additional life insurance and. The first thing to understand is a lot of people talk about PUA as if it's this kind of separate cash component of a whole life insurance [00:02:00] policy, as if it's, like its own compartment inside a whole life policy in that you can design to have more cash in a policy, and while you can design to have more cash, it's important to understand the PUA writer is not a separate component.

[00:02:15] Okay. PUA Rider buys additional paid up life insurance. PUA, Paid, Up, Additions. So I'll just say it one more time. What does that mean? That means it buys more death benefit. Okay. And so it's really important to understand that little piece of it because we're not creating a separate cash component. We're buying more death benefit, but this death benefit happens to be paid up, meaning no more future premium payments are due on this little chunk that you're buying.

[00:02:43] And it's that piece of it that's actually creating the possibility to create more cash value in the early years of the policy. That's what is actually creating the cash value. And so what we find is that the PUA rider [00:03:00] is the most important from an IBC perspective. When we're talking about capitalizing our system, the PUA Rider does a lot for us in terms of creating some of that early capital.

[00:03:13] Where, in the early years of a whole life insurance policy, we're paying for a lot of the costs and the PUA Rider helps overcome some of those costs from a cash value perspective and allows us to start capitalizing a little more quickly.

[00:03:27] John Montoya: Yeah, and one thing I'll add there is that, When it comes to life insurance, there is only one type of life insurance that you can actually, where you can actually own the death benefit.

[00:03:40] And the PUA writer is really illustrative of this because when you contribute premium to this writer, you're essentially. Buying equity in your own death benefit there. There is no other type of life insurance policy that exists. [00:04:00] Not a term, not any flavor of Universal, where you get to own equity in your death benefit.

[00:04:05] And so what you're doing with this writer is basically buying your death benefit and it creates instant equity that you can then, Use as collateral for policy loans, which is, the basically the backbone of what we're doing with IBC and Infinite Banking. We're capitalizing.

[00:04:29] If you understand that you can only own your death benefit with a whole life policy you want to own as much of it as possible. And what's the most advantageous way to expedite the owning of your death benefit? It's through the PUA writer and only with the whole life policy do you get this incredible benefit to really go out and buy up [00:05:00] your own death benefit.

[00:05:02] Actually lay claim to it every single time that you make a premium payment to that PUA writer, you are controlling not only the death benefit. The cash equity, the cash value in the policy that is a reflection of that future death benefit. So extremely unique and powerful. And it's essential to really becoming your own banker.

[00:05:28] And that's why, we do want to prioritize, especially in the early years, that you take advantage of this writer because at the end of the day, what are you trying to do? You're trying to put yourself and your family in a better situation and through this writer it happens. In the short term and the long term it's really quite incredible when you can accomplish two things at one time.

[00:05:52] John Perrings: Yeah. And you made a great point or a great distinction, you called it a PUA [00:06:00] premium payment. PUA is premium. It's buying death benefit. And it's a really important and critical thing to understand that a lot of people are getting wrong out there and they're really miseducating a lot of people about what's happening with a life insurance policy and what's happening with the PUA rider.

[00:06:19] So as we're talking about how PUA is used and we're talking about, a couple like mis misconceptions so to speak, of, what other people are saying about it. So let's talk about some design principles, right? So if, how should we design a policy with the PUA writer and.

[00:06:42] Again, a lot of, I talked to some of the influencer people out there that are talking about whole life insurance and their whole, really all they're doing is cranking up. To get maximum ca cash value. That's the only thing they really understand about Infinite Banking is to [00:07:00] crank up the cash value to the maximum in the early years of the policy.

[00:07:04] And I've said it before, I'll say it again. If all things were equal, of course we would want that cash value cranked up to the maximum that you can get in year one, right? It'd be what? It'd be awesome if we could just get a hundred. Liquidity from, if we pay 10,000 in premium, we have 10,000 in cash value on day one.

[00:07:24] Of course we'd want that. Guess what though? There's no such thing as a free lunch. We're buying life insurance and if you pull a lever over here to create a. An outcome of cranking up the cash value to the max in year one. Another corresponding lever always goes up over there that will have some trade-offs.

[00:07:45] There's always trade-offs. There's no, there are no deals in the life insurance business or the insurance business in general. Everything's a trade-off between cost and risk. And if you do something over here, you're gonna have a corresponding trade off over there. [00:08:00] And the trade-offs for cranking up the early cash value are that you're either going to have to pay up the policy early you're going to have to max out all the quote unquote room in the policy where you have zero flexibility to expand your system or you're going to have to introduce non guaranteed policy elements.

[00:08:22] Create a situation where the policy will just blow up in the future and it actually starts looking more like an IUL or UL type product where you've got some rising costs of insurance extra premiums might be due in the future. So all of those things might, will happen if you take that road or that option to crank up the early cash value.

[00:08:46] If we're practicing Infinite, Banking, what are we trying to do? We're trying to capitalize and we're trying to build a bank, so to speak. Do we want to build a bank? That can [00:09:00] only accommodate what we're doing today. Or do we want to build a bank that can accommodate everything we want to do in the future and give us the ability to open up new branches of our bank.

[00:09:10] Right? And that's if we're looking at a kind of simple goal of what we're trying to accomplish with IBC from a design perspective, we want to design a policy. Like it's the last one you can ever get because guess what? It might be the last one you could ever get. And so what's happening when people design these policies and they crank up the cash value?

[00:09:33] We don't know what your insurability will be tomorrow after you pay the first premium on your first policy. So you may never get the chance to expand your system. And so it's very short-term thinking to crank up that cash value in the early years, and it's a total misunderstanding of how the PUA writer works and what the benefits of the PUA writer are.

[00:09:55] I'll add that

[00:09:57] John Montoya: if you don't really know how long [00:10:00] you plan on working. Meaning whether you're just entering the workforce in your twenties or you're in your thirties, forties, fifties, and you don't have a crystal ball. Let's face it. Who does? How long are you planning to work? How do you decide?

[00:10:19] I only wanna fund a policy for five years, seven years, 10 years. The nothing in life is written in stone. And if you're, In a position where you have to keep working or maybe you really enjoy what you do and you want to keep working longer just cuz you enjoy it and you have money coming in.

[00:10:41] Where are you gonna direct that money? And what we're trying to relay to you is that you need a place for your money. And if you suffer from short-term, think. And, you have the lens completely on. I need to have the cash value cranked [00:11:00] up in the first year you're completely missing the bigger picture because you're gonna live a long time.

[00:11:08] You get approved for a whole life policy. Guess what? The actuaries and the underwriters, they all agree that you're gonna make it out, probably to your early eighties or longer. You're gonna be around a long. So all the money that you're bringing home after expenses, it's gotta go someplace.

[00:11:27] And if you have a policy designed for you where you can only fund it for 5, 7, 10 years, what happens after that

[00:11:37] John Perrings: point? Exactly, or if you can only fund it. If you've designed the policy to only accept your capabilities today, your capacity today for capital, what happens in five years when your capacity increases and you can no longer qualify for life insurance.

[00:11:57] Also, so let's [00:12:00] jump in and so if we're designing a policy. Question I often ask, and I got this from Ed Slot. He's a c p a guy out there and he does more IUL, so I don't really agree with that, but he makes a great point using this line. And he says, if you had a place to put money that.

[00:12:21] Earned, I don't know, 40 times what it's gonna earn in a bi, in a typical bank grew tax deferred, you could get to it tax free. Has creditor protection provides a legacy of wealth for your family? Like all these different benefits, would you wanna be able to only put money there for a little bit of time or for as long as possible?

[00:12:41] And so far, A hundred percent of the people that I asked that question to say as long as possible. So when we design a policy, we want to design it so that you can, you have the option to pay a premium for as long as possible. And the PUA writer, as we've been discussing, affects this. If you. [00:13:00] Max out the PUA rider, it is going to significantly affect how long you can pay a premium on an individual policy.

[00:13:09] As John Montoya just mentioned, it may create a situation where you can't pay any premium in, after year five or year seven, one of those, one of those two is how it would typically pan out these days. By the way, here we are at year, let's just say year five, your policy.

[00:13:34] Just became cashflow positive. You just overcame all the early costs of a whole life insurance policy, and now you can't pay any more premium. How in the world does that make sense? It's like you just started a business, you just broke even, and now you can't do anymore business, right? Or you can't you can't expand that business at all.

[00:13:55] You just, you're stuck with that one business. So [00:14:00] that's a. That's a big deal. And I really spend a lot of time talking to people about understanding the very significant tradeoffs that the PUA writer has. And so another trade off on this side of things is. If you can pay for a longer period of time, you may not be able to put any more PUA into the policy.

[00:14:27] And so there's a lot of argument out there. And they're all wrong cause they disagree with me, of course. But if you have a, if you're practicing Infinite Banking and you deploy capital from your whole life insurance via a policy loan, right? And then you go buy an asset that creates, And then has a return on it.

[00:14:50] Where are you gonna put that return if there's no room inside your policy to fund any windfalls or any returns on your capital? [00:15:00] And that's a big deal. It's if you're gonna practice IBC don't bastardize it and have this short term thing where you get one chunk of money that's doing something for you.

[00:15:13] On a strategic fashion, and then all the rest of your money can no longer be used in a strategic fashion. It's do you wanna be strategic or not? That's the that's the question. Yeah.

[00:15:25] John Montoya: And if that resonates with any listeners out there that maybe have purchased a policy that was funded for, or designed to be funded for 5, 7, 10 years, and you're looking at your situation now, realizing that you need a longer runway to continue funding premiums what's the solution?

[00:15:42] The solution is well, Talk to an IBC practitioner first to get your situation assessed. But then from there you're gonna want to have a con conversation about human life value, right? Because you want to make sure [00:16:00] that time is ticking and your health today is not gonna. The same five years from now, 10 years from now, 20 years from now.

[00:16:09] So you wanna make sure that you're locking in your insurability to be able to create your future policies if you're stuck with that short runway right

[00:16:18] John Perrings: now. Yeah. And I should say, or we should say have we written short runway policies? Yep. And there's never a hundred. Design criteria for everybody.

[00:16:33] There, there is some uniqueness to everybody's situation. For example, if you're in your seventies, sixties, or seventies, like it may not make sense to have a really long runway for paying premium because you're, you. It depends on where your income is coming from. You may be on a fixed income type of scenario where you're, maybe you wanna move an as move assets from a qual qualified type of money into [00:17:00] tax free forever money in the form of a death benefit.

[00:17:02] And so there may be a limited runway to your ability to pay a premium. So in some of those cases it could make sense. So I'm I definitely wanna make sure. As I get fired up about, the length of time to pay a premium, there could be times where that could make sense. But man, I tell you what, when I see these, policies sold to a 20, 30 or 40 year old who has so much, they're like, a 40 year old getting ready to go into their maximum earning stage in their life, in their fifties, and they're buying five pays, right?

[00:17:35] Like craziness.

[00:17:37] John Montoya: We've covered the P way basics. And the PUA design principles. How about we turn it over to PUA priorities? And this is a question that I get every once in a while. Do I have to keep funding the PUA? Now when I get this question? Yes. Let me take that back. You [00:18:00] don't have to keep funding the PUA.

[00:18:02] Remember, the PUA is optional, but does it benefit you to keep funding the PUA writer? Absolutely. One of the things that we've said over and over on this podcast is that you'll never be in a worst position by having access to cash. So while this writer is. If you have the income coming in, you got the cashflow.

[00:18:29] You, you should absolutely take advantage of the PUA writer. So you don't have to keep funding it but you should. Now let's set out the priorities because the priorities will guide you as far as. If you're stuck in a situation where it's the PUA writer or something else let's just first say number one, as much as possible, you should with your cash flow max out the PUA writer every single year, because [00:19:00] again, you'll never be in a worse position by having access to cash.

[00:19:03] But number two if you aren't able to. Maximize the PUA writer as much as you can. Then you at least want to satisfy the minimum amount to keep your writer in force for the next period, whether it's the next year or sometimes on these whole life policies. It's a rolling five year period.

[00:19:26] So it's extremely important that, you know what the minimum. To keep your PUA writer in force for the next year or the next rolling five year period, cuz you don't wanna lose this benefit. And then the third priority is when it comes to should I contribute cashflow towards the PUA writer or should I make a loan repayment?

[00:19:56] And my rule of thumb on this is that, The [00:20:00] policy loans are open-ended. We are our own banker. We get to choose how much we want to repay the loan and the frequency, whereas the PUA, as I just mentioned, you have a minimum amount to satisfy each year or rolling five year period depending on the policy. So there, there's really more of a clock that you have to be aware of and.

[00:20:27] If you're having to decide between one or the other, I personally lean on funding the PUA because I want to make sure I'm building that cash value and it's, once it's there, it's compounding forever, and I can then have the freedom and flexibility to make that loan repayment and continue to pay off that loan over a much longer duration if

[00:20:50] John Perrings: need.

[00:20:50] Yeah. And I like that as well. And I think you know, it, you really just have to, that's the great thing about IBC is like you can [00:21:00] make the decision that's the best for you at the time that you have to make that decision. And let me talk about the option to pay PUA here for a second. When we design a policy, we've talked a lot about designing a policy to pay a premium for as long as you can.

[00:21:19] For as long as possible, however, that needs to be understood. In light of the fact that you can always opt to stop paying a premium. You can always do what's called a reduced paid up, or you can do a partial reduced paid up. There's lots of options to stop paying a premium, but once you've designed a policy that you can't pay any more premium, there aren't as many options available for you to keep paying premium if your policy is designed the other way.

[00:21:47] One thing I wanted to touch on with the optional PUA ability for the PUA payment premium payment to be optional, something to understand is that [00:22:00] one of the trade offs of using the PUA to get cash value when you design the policy, let's say you design a policy for a thousand dollars a month and you crank.

[00:22:14] The, you crank up the way that breaks out to, let's say a hundred dollars of base premium and $900 of PUA. If anything happens, so this is another thing to think about if anything happens where. You come across a rough period of time and you need to, scale down your premium payment and you reduce the amount of that PUA or even eliminate it altogether.

[00:22:41] Your policy will not perform anywhere close. To what was illustrated, especially if those PUA payments stop in the early years of your policy because all of, almost all of the cash value, and let's just call it the first five or so years, seven years, somewhere in that neighborhood, almost all of it is coming from [00:23:00] PUA at that point, and now seven years later.

[00:23:04] If you haven't created that cash value by paying the PUA portion of your scheduled premium you're now starting from a place that's way behind where you were originally thinking. And so it's super important to understand The PUA really has the most effect in the early years, and what you'll find is that as you get older, the base premium actually takes over and starts having a much higher effect than the PUA.

[00:23:31] That's not to say we still don't want to pay PUA premiums though, because that PUA premium is still doing a lot to increase. It's just that it's not relative to the base premium. It's not perf, it's not doing as much. As the policy matures and you get older. So that is one of the things that I wanted to touch on, in, in a, from a priority perspective, is that if you, regardless of how you do it, if you want to go with one of those people that cranks up [00:24:00] your cash value in year one, you better just make sure you're paying that PUA premium.

[00:24:05] If you wanna work with somebody like us that has a more balanced approach and understands the value of the base premium, you, no matter what happens, your policy will perform closer to how it's illustrated. If you have to stop paying and it'll blow. High cranked up cash value PUA policy out of the water with the additional room to expand your system in the future, blow it out of the water.

[00:24:31] It's insane how much bigger the policy will be. So that's the way we're approaching all of this, and it's important to understand that, there are big offs to what we do with that PUA writer. And Nelson said, don't be af don't be afraid to pay a premium. That includes PUA. And guess what?

[00:24:50] That includes base premium too. And so base premium is pretty good. So anyway, I don't know if that what do you think of that, [00:25:00] John? Anything to add to that? I love

[00:25:02] John Montoya: that you added that last point because we're talking about the PUA the priority of the PUA and what's the biggest priority of.

[00:25:11] Paying that base pay premium. Yes. Yeah. People come into this space with IBC and they get all excited about it and Yeah. Wanting to take advantage of the Paid Up Additions writer and they forget to value the base premium.

[00:25:26] John Perrings: Yep. That is absolutely true. And you know what? They also forget to value that death benefit, I'll add one more thing about the death benefit you, when you crank up the PUA, another thing that's happening is you're cranking up your total underwriting amount, and so you could come into a situation where you've used up all of your insurability just to have that PUA portion of your policy. And so even if you do qualify in the future, if your [00:26:00] system hasn't expanded significantly, You still may not qualify for life insurance because you've used up most or all of your insurability.

[00:26:09] And so that just dawned on me as another point as we are wrapping up here, that I think is important to understand.

[00:26:15] John Montoya: So I think what you're saying is reach out and talk to a IBC practitioner.

[00:26:19] John Perrings: Is that right? I think so. I think that would be a wise thing for for most people to do. If they're interested in Infinite, Banking, connect with the organization that created Infinite Banking.

[00:26:32] Yeah.

[00:26:32] John Montoya: And stands behind it. And we'll we'll verify who is actually a legitimate practitioner too. All you have to do is go to Infinite Banking dot org and you can suss out if the person that you're talking to is actually a part of the organization and in good

[00:26:50] John Perrings: standing. That's right.

[00:26:50] Edith McDonald's, not McDowell's.

[00:26:55] John Montoya: That's a Coming to America reference for the millennials and for the

[00:26:59] John Perrings: youngsters [00:27:00] out there. Yeah, for the youngsters out there required watching for anybody out there. Awesome. This has been a great episode. We kept it a little short this time. We've been rambling lately, so it was nice to do a shorter episode.

[00:27:13] This is good. So if any of this is resonating with you and you'd like to find out how this could pertain to you in your specific situ, You can always go to our website, the fifth edition.com, and right there you can schedule a free 30 minute appointment with us. If you're one of those people that likes to do all your learning and do all your research online before you talk to somebody, guess what?

[00:27:37] We created an online course just for you, and you can get a 50% discount to that course by going to www.TheFifthEdition.com. It's right there at the top. Awesome, John. Good good topic today.

[00:27:49] John Montoya: I agree. All right, thanks, John. Thanks everyone. Take.