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Steve Parisi

Our goal is to make Whole Life Insurance transparent. (IBC Global is independent of Nelson Nash Institute)

We teach people how to get the most cash value, how to grow tax-free wealth, pay off debt, buy real estate, and more!

10/28/2026

Can a parent set up a whole life insurance policy for a child with a low required premium, while still keeping the option to add more money during stronger cash-flow years?

In many cases, yes, depending on the insurance company and how the policy is designed.

Here’s the basic idea.

Let’s say a parent wants the minimum planned premium to be around $300 per year for a child. The policy may be structured with:

- A required premium of ~$300
- A MEC limit of $3,000
- An option to add up to $2,700 per year to their Paid-Up Additions Rider

That means the parent may only be committed to $3,000, while retaining the option to add more later.

For example, a policy might use a $300 base premium and allow additional funding in years when the family has more available cash flow.

The important part is that the additional funding is not automatic or required. It is simply an option built into the design.

That flexibility can matter because family finances rarely stay exactly the same for 15 years.

Some years may be strong. Other years may not be.

A well-designed policy should reflect that reality rather than assume every future payment will be identical.

There are a few important details to review:

- The cost of any riders added to the policy
- The Insurance company’s rules for paid-up additions
- The policy’s minimum funding requirements
- The maximum amount that can be deposited without changing the policy’s tax treatment
- What happens if funding is reduced, stopped, or the policy later lapses

The specific numbers will vary based on the child’s age, the insurance company, the policy design, and the family’s goals. An illustration should be reviewed carefully before making a decision.

I walked through a hypothetical example of this structure in the video linked in the comments.

10/27/2026

Why is it hard to fund a 10/90 whole life policy with Guardian for 20 or 30 years?

This is a question I hear often, so let’s break it down simply.

A “10/90 split” generally means that roughly 10% of the planned payment is allocated to the base premium and term rider, while the remaining 90% is directed toward paid-up addition, or PUA Rider.

PUAs can increase a policy’s cash value and death benefit. But that second part is important.

When the whole life death benefit increases, the insurance company’s exposure increases too. That’s why carriers place limits on how much can be added to the PUA rider each year.

With some insurance companies, the allowable PUA funding can depend on several factors, including:

- The base premium
- The policy year
- Whether a one-year term rider is included
- How much term insurance remains
- The carrier’s underwriting and policy rules

A one-year term rider can provide additional room to fund PUAs for a longer period. As PUAs are added, the whole life portion generally increases while the term portion decreases.

Once the term rider reaches its limit or expires, the amount that can be added to the PUA rider may be reduced. At that point, continuing to put the same amount into the policy may require different policy design, additional underwriting, or another policy.

Here’s the part that often gets missed:

The ability to fund a policy at a certain level for 20 or 30 years is not automatically the best design.

A larger term rider may create more funding capacity, but it can also increase costs. If your financial situation changes and you stop funding earlier than expected, you may have paid for capacity you never used.

That’s why the right question is not simply:

“How do I put the maximum amount into this policy for as long as possible?”

A better question is:

“What funding level is realistic for my situation, and how flexible does the policy need to be if life changes?”

Policy design should be based on your goals, budget, time horizon, and the specific carrier rules. Illustrations are not guarantees of future performance, and policy values and funding limits can vary.

I explain the mechanics, examples, and specific PUA rules in the full video linked in the comments.

10/26/2026

Does a lower base premium automatically keep a whole life policy from becoming a MEC?

Not necessarily.

There are two separate sets of rules involved:

1. Carrier rules
When designing a whole life policy, we look at the required base premium and how much additional premium can be paid through a Paid-Up Additions Rider, or PUA Rider.
PUAs can increase the policy’s death benefit and cash value over time. But every carrier has its own limits.

For example, one carrier may allow PUAs up to 10 times the base premium, while another may allow 15 times.

So you can’t assume every company designs policies the same way.

2. IRS rules
The IRS limits how much premium can be paid before a policy becomes a Modified Endowment Contract, or MEC.

That limit depends on factors such as:
- Age
- Gender
- Death benefit
- Product design
- Guaranteed interest rate

That’s why two policies with the same annual premium can have different MEC limits.

If a policy becomes a MEC, loans and withdrawals generally receive different tax treatment.

How would I approach the design?

I would start with the maximum annual payment you want to make, including base premium plus PUA premium.

Then I would:
1. Solve for the minimum death benefit needed to target that MEC limit
2. Minimize the base premium based on the carrier’s rules
3. Maximize the PUA Rider within those limits
4. Review the full illustration, including guaranteed and non-guaranteed values

One important reminder: whole life insurance is life insurance first. The primary purpose is the death benefit. Cash value can provide flexibility, but loans and withdrawals may reduce policy benefits, accrue interest, and create tax consequences if the policy lapses or is surrendered.

I walk through the carrier limits, MEC rules, and side-by-side examples in the full video. I've got it linked in the comments.

10/23/2026

What is the true net cost of borrowing from a whole life insurance policy?

Most people compare the policy loan rate to the policy’s cash value growth rate.

That’s useful, but it doesn’t tell the whole story.

Here’s a real case study:
- Cash value at the start of the year: $567,151
- Cash value at the end of the year: $596,311
- Cash value growth: $29,160
- Loan amount: $500,000
- Loan rate: 5.77%
- Annual loan interest: $28,850

Now compare the actual dollars:
$29,160 in cash value growthminus$28,850 in loan interest
$310 cash positive for the year

That doesn’t mean every policy loan works this way.
If the loan had been $550,000 instead, the result would have been negative.

The correct analysis depends on:
- The policy’s guaranteed values
- Dividends, if applicable
- The loan rate and loan type
- How the policy is funded
- How long the loan remains outstanding
- Whether loan payments are made over time

In this case study, the policy loan was repaid with $50,000 annual payments.

Over the full repayment period:
- Total loan interest paid: $158,000
- Total cash value gains received: $730,000

The point is not to assume every policy loan creates a positive result.

The point is to stop analyzing policy loans using one percentage in isolation.

Before borrowing, ask for:
1. Year-by-year cash value growth
2. Year-by-year loan interest
3. The dollar difference each year
4. The total result over the life of the loan

I walk through the full illustration and Excel analysis in the video linked below.

10/22/2026

Can you lower your PUA payments today and catch up with a larger payment later?

In many cases, yes.

But there are two important things to understand.

1. Your available MEC room may accumulate over time.
For example, suppose your policy allows up to $150,000 per year, but you only contribute $50,000.

Depending on the policy design, the unused room may be available for future funding. If you underfund the policy for several years, that unused capacity may build.

This can create the ability to make a larger catch-up payment later without automatically creating a Modified Endowment Contract.

Example:
You planned to contribute $100,000 per year.
You funded that amount for the first few years, but then life happened. You contributed only $10,000 or $25,000 for a period of time.

Later, you may be able to make a larger payment to catch up.
But there is another factor: the insurance company’s rules.
Different carriers have different limits on PUA contributions and catch-up payments.

One important question to ask is:
“Can I make a catch-up payment without going through medical underwriting again?”

Some policies with a One-Year Term Rider may allow larger contributions without new underwriting. Carriers may use different names for similar riders. MassMutual, for example, calls its version LISR. Guardian uses Level Q Term.

When you make a large PUA payment, the whole life death benefit increases. As that happens, the amount of one-year term insurance may decrease. That is why you may see the term portion drop after a large contribution.

Before making a large payment, confirm:
• Your current MEC limit
• Any unused funding room
• The carrier’s PUA rules
• Whether underwriting is required

The answer may be yes.

The smart answer is: check the specific policy and carrier rules first.

I walk through real policy examples in the full video. Link in the comments.

10/21/2026

Before buying a whole life insurance policy, ask this question:
“Can you show me exactly how the policy is designed, and how the agent is compensated?”

I often hear people say:
“Whole life insurance is a rip-off. Agents only sell it because they make massive commissions.”

That opinion usually comes from looking at the product, but not the design.

If the primary goal is cash value, your premium generally gets allocated across three areas:

1. Base Premium
Typically provides:
• Higher upfront death benefit
• Lower upfront cash value
• Higher agent compensation

2. Term Insurance Rider
Typically provides:
• Higher upfront death benefit at a lower cost
• No upfront cash value
• Lower agent compensation

3. Paid-Up Additions Rider, or PUA
Typically provides:
• Lower additional death benefit
• Higher upfront cash value
• Lower agent compensation

This is where a larger portion of the premium can immediately create additional cash value.

Here’s the important distinction:
Two policies can use the same insurance company, the same product, and the same annual premium, yet produce dramatically different results depending on how they are designed.

In one comparison using a $100,000 annual premium:
Policy 1: 100% Base Premium
• 1st-year cash value: $0
• 10th-year cash value: approximately $830,000
• 1st-year agent compensation: approximately $93,000
• Total compensation over 10 years: approximately $140,000

Policy 2: $7,000 Base, $620 Term Rider, and $92,400 PUA
• 1st-year cash value: approximately $87,000
• 10th-year cash value: approximately $1,160,000
• 1st-year agent compensation: approximately $8,700
• Total compensation over 10 years: approximately $28,700

Policy 3: 10-Pay Whole Life with $6,700 Base, $1,500 Term Rider, and $91,800 PUA
• 1st-year cash value: approximately $92,000
• 10th-year cash value: approximately $1,240,000
• 1st-year agent compensation: approximately $5,200
• Total compensation over 10 years: approximately $25,400

The point is not that every policy should be designed one specific way.

The point is that the design should match the objective.

If your goal is primarily cash value, you should understand:
• How much goes toward base premium
• How much goes toward riders
• How much goes toward PUAs
• How much cash value you receive
• How the agent is compensated

It’s your money. You deserve to see the full breakdown.
I put together a full video explaining this in detail. The link is in the comments.

10/20/2026

Which whole life policy loan is better: direct recognition or non-direct recognition?

The honest answer: it depends.

The bigger mistake is comparing one company’s direct recognition policy against another company’s non-direct recognition policy. That can make almost any strategy look better on paper.

Non-direct recognition:
The dividend rate applied to borrowed cash value is generally the same as the rate applied to non-borrowed cash value.

Example:
- $100,000 cash value
- 6% dividend rate
- $50,000 policy loan

Both the borrowed and non-borrowed portions receive the same dividend rate.

Direct recognition:
You still receive dividends on the full cash value, but the dividend rate applied to borrowed cash value may be different from the rate applied to non-borrowed cash value.

It could be higher or lower, depending on the insurance company and contract.

So how should you compare them?

Use the same:
- Company
- Product
- Funding schedule
- Loan amount
- Repayment schedule

Then evaluate:
1. Cash value before and after the loan
2. Total loan interest paid

One policy may show higher cash value after repayment but require significantly more loan interest along the way.
For example, one Guardian comparison showed the non-direct recognition policy with more cash value after repayment. But it also accumulated more loan interest because the rate was variable. When the rate was stress-tested higher, the difference became much smaller.

In a MassMutual example, the direct recognition policy performed better under the current assumptions. But dividends, loan rates, and recognition practices can change.
The answer today may not be the answer ten years from now.
That’s why I would not choose a policy solely because it uses direct or non-direct recognition. Product flexibility, funding structure, premium design, and long-term fit usually matter more.

I break down the actual illustrations and side-by-side analysis in the full video.

10/19/2026

Can a whole life policy be designed primarily for cash value?

Yes, it can.

There are two common ways to approach the design:

1. Start with the death benefit
Let’s say you want a $1 million death benefit and want the policy designed as cash-value-focused as possible.

The first question is:
What is the MEC limit?
The MEC limit is the maximum amount you can fund into the policy under the design before it becomes a Modified Endowment Contract, which can change how loans and withdrawals may be taxed.

For example, if a $1 million death benefit creates a $50,000 MEC limit, the next question is:

Do you realistically want the ability to fund $50,000 per year?
If yes, we then look at where that money goes:
- Base premium
- Term insurance rider
- Paid-Up Additions, or PUAs

When the goal is maximizing cash value, the design may involve:
- Minimizing the base premium
- Using a term rider where appropriate to increase the death benefit and MEC limit
- Directing as much funding as possible to PUAs

For example, a $50,000 funding capacity might be structured around $5,000 in base premium and term, with $45,000 directed toward PUAs.

2. Start with the amount you want to fund
This approach starts with your available funding.

Examples:
- “I want to fund $50,000 per year for 10 years.”
- “I want to fund $125,000 per year for 4 years.”
- “I have a lump sum I want to contribute.”

Then the question becomes:
What is the minimum death benefit needed to create a MEC limit that fits the funding plan?

The same total funding can produce different results depending on how quickly the money enters the policy.

In one example, funding the same amount over 4 years instead of 10 created more than $70,000 of additional cash value by year 10 because more money entered earlier and had longer to compound.

The right design depends on your age, health, goals, funding capacity, and timeline.
The goal is not simply to buy a $1 million policy.

The goal is to understand:
- How much you want to fund
- How the MEC limit works
- Where each dollar goes
- Whether the design matches your actual objective

I walk through both approaches with illustrations and breakdowns in the video linked in the comments.

10/12/2026

A question we hear a lot is:
“Can I design a whole life insurance policy specifically for cash value, with the minimum death benefit necessary?”

Yes. The next question is usually:
“Where do I start?”

There are two common approaches.

Approach A: Start with a death benefit

Let’s say you start with a $1 million death benefit and want the policy focused on cash value.
First, understand the MEC limit.
The MEC limit is the maximum amount you can fund into the policy each year without turning it into a Modified Endowment Contract, which can change how distributions are taxed.
For this example, assume the $1 million death benefit creates a $50,000 MEC limit.

That funding is typically split between:
- Base premium
- Term insurance rider
- Paid-Up Additions, or PUAs

If the goal is to maximize cash value, I generally look to:
1. Minimize the base premium
2. Use a term rider where appropriate
3. Direct as much funding as possible toward PUAs

For example, a $50,000 MEC limit might use approximately $5,000 between base premium and term insurance, with the remaining $45,000 directed toward PUAs.
PUA funding typically shows up in cash value much sooner than base premium dollars.

Approach B: Start with the amount you want to fund

You might say:
- “I want to put in $50,000 per year for 10 years.”
- “I want to put in $125,000 per year for 4 years.”
- “I have a lump sum I want to contribute.”

Then the question becomes:
What is the minimum death benefit needed to support that funding amount?

For example:
$500,000 over 10 years
- $50,000 per year
- MEC limit of at least $50,000

The same $500,000 over 4 years
- $125,000 per year
- MEC limit of at least $125,000

The same principles apply:
- Minimize the base premium
- Use a term rider where appropriate
- Maximize PUA funding
- Track break-even and long-term cash value

In one real example, funding the same total amount over four years instead of ten resulted in more than $70,000 of additional cash value by year 10.

More money entered the policy earlier and had more time to compound.

The right design depends on your age, health, funding capacity, goals, and timeline.

The goal is not simply to buy a $1 million policy.
The goal is to understand how much you want to fund, how the MEC limit works, where each dollar goes, and whether the policy supports your objective.

I walk through both approaches, including the illustrations and policy breakdowns, in the video linked in the comments.

10/09/2026

One question I think more people should ask before buying a whole life policy is:

“How has the insurance company’s actual performance compared to the illustration?”

This matters because an illustration is a projection. It is not a guarantee of what will happen, even if the dividend stays the same.

So how do you evaluate it?
1. Look at the company’s dividend history
- Review the insurance company’s historical dividend rates.
- You may see periods with very high dividend rates when interest rates were higher.
- You may also see dividend rates decline in lower interest rate environments.
The key is to understand what has actually happened over time, not just what the current illustration assumes for the future.

2. Review a policy that’s 20–30 years old
- If possible, review the original illustration with the dividend rate assumed at the time.
- Compare that to the actual results: premiums actually paid, cash value actually accumulated, and the actual IRR on cash value.
This helps you see how the policy actually performed over time.

3. Review a more recent policy that is 10–15 years old
- Compare the original illustration with the actual performance.
- Policies over the past 15 years have lived through a low-dividend-rate period, so they will likely look less attractive than older policies.

That’s okay. The goal is to see how the policy performed compared to the original illustration. I just want to see that the policy isn’t significantly underperforming.
If someone is reluctant to show you the less attractive years, that’s worth paying attention to. I would rather understand the potential downside before committing money than discover it after the fact.

The most useful comparison is:
- What the original illustration projected
- What the policy actually did
- How the current dividend rate compares
- How the cash value and IRR changed over time

In my experience, policy design also matters. Policies with higher base premiums can be more sensitive to changes in the dividend scale.

That’s why I focus on both the insurance company and how the policy is structured. A strong company does not automatically make every policy design a good one.

The goal is to understand how the policy has performed in different environments and whether the actual results reasonably track the original assumptions.

I walk through several real policy examples and compare the original illustrations to the actual results in the video linked in the comments.

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