- First posted on 2023-01-08
Often times millionaire baby insurance plan is mentioned in the insurance industry or to potential clients (usually couples with newborn babies), but what is it really?
Millionaire Baby Insurance Plan is essentially a Participating Whole Life Insurance, where the baby acts as life insured.
Participating Whole Life Insurance is an insurance plan that both insures lives but also bears the function of tax free investment strategy. When a Participating Whole Life Insurance policy is signed between the owner and the insurance company, the owner participates in the earning of the insurance company’s operations, hence the name “Participating Whole Life Insurance”.
As the insurance company operates and earns profit every year, a portion of the profit is shared among all the Participating Whole Life Insurance policy holders, so the cash value and death benefit of the insurance policy always (with very rare exceptions) increase.
Due to young age of the baby and the long enough time span for the fund to grow, the cash value within the Insurance Plan will reach a considerate amount before its usage become required. This is explained as follows:
- The insurance premium cost is usually tied to the mortality, since newborn babies generally have lower mortality rate compared to adults, the premium is comparatively lower.
- Usually the fund will grow in the Insurance Plan until the baby turns 18 (when graduate education tuition needs to be withdrawn from this Insurance Plan). So from year 0 to year 18, the fund will enjoy compound growth, often cases the achieved cash value at year 18 can be really considerable.
For a detailed view, EquiMax Participating Life Insurance report from Equitable Life Insurance Company is attached in below for illustration:
As can be seen in table below that even after 2 million withdrawal is made from age 18 to age 100 (theoretical age 100), there are still more than 2 million dollars to be passed onto the next generations without tax payable.
Of course the $10k annual premium is not always required, annual premium can be adjusted according to the actual need and budget.
If you are interested in purchasing such insurance plan for your baby or grandson/granddaughter, please feel free to contact me!
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