20/11/2020
MAKING BRIGHT, BRIGHTER!
* (For Advisors who have requested for the Maxilink One + Maxilink Bright combination)
MAXILINK ONE PLUS MAXILINK BRIGHT -- IT DOES NOT TAKE MUCH TO GET COVERAGE, ACCUMULATE WEALTH, AND PREPARE FOR WEALTH TRANSFER!
Prepared due to demand for Maxilink One + Maxilink Bright illustration on top of Maxilink One + Maxilink Prime
Let us say that a client (40-year old male, non-smoker) is faced with a choice of getting a PhP500,000 Maxilink One policy vs a Maxilink Bright policy with annual premiums amounting to PhP100,000 (SEE PICTURE 1). The client typically has these questions:
1) What will I receive if I don't die at age 88? On a Maxilink One policy, the client receives the fund value of PhP21.1mn vs the Maxilink Bright fund value of PhP10.6mn (at 8% illustration).
2) What will I receive if I die at age 88? On a Maxilink One policy, the client receives the fund value of PhP21.1mn vs the Maxilink Bright total death benefit (TDB) of PhP11.8mn (at 8% illustration).
3) What if the fund generates lower returns? At 4% illustration, the Maxlink One fund value at age 88 would be at PhP3.6mn vs the Maxilink Bright TDB of PhP1.5mn and fund value of PhP381k.
4) Why is there a big difference between the Maxilink One and Maxilink Bright fund and TDB values in the latter years? First, in Maxilink One, premiums mostly go to fund value and with the effects of compounding results in significant sums in the latter years. In the case of Maxilink Bright, most of the early premiums go to charges. A small amount goes to fund value. Therefore, despite compounding, we get lower fund values in the latter years. Secondly, from age 60 onwards, Maxilink Bright charges start increasing peaking towards age 88 (See green bars in Picture 1). This further diminishes the Maxilink Bright fund value and consequently, the TDB.
5) Where is the value of Maxilink Bright then? The value of Maxilink Bright is in the early years of the policy (first 26 years) were the TDB of the Maxilink Bright policy is greater than the fund value of the Maxilink One policy. THEREFORE, MAXILINK BRIGHT PROVIDES PROTECTION VALUE IN THE EARLIER YEARS WHILE MAXILINK ONE PROVIDES WEALTH ACCUMULATION & WEALTH TRANSFER VALUE IN THE LATTER YEARS.
6) WHAT IS THE BEST WAY FORWARD (SEE PICTURE 2)?
• Look at the area highlighted in BLUE. The fund value of Maxilink One (PhP21.1) is multiple times greater than fund (PhP10.6mn) and TDB (PhP11.8mn) of Maxilink Bright at age 88.
• Look at the area highlighted in GREEN. If the client dies at age 55, the TDB of Maxilink Bright (PhP2.2mn) is greater than the Maxilink One fund value (PhP1.5mn). In exchange for protection in the earlier years, a client is giving up a significant amount of wealth accumulation and transfer value in the latter years.
• Look at the area highlighted in YELLOW. At age 65, the Maxilink One fund value (PhP3.8mn) is greater than the TDB of Maxilink Prime policy (PhP3.5mn). From this point on, the fund value of Maxilink One grows much bigger compared to the Maxilink Prime fund value and TDB.
• THE BEST WAY FORWARD: Cut the PhP500,000 budget by putting PhP250,00 in a Maxilink One Policy for wealth accumulation and transfer and the remaining PhP250,000 into a Maxilink Bright policy for protection. The combo policy (Maxilinlk One + Maxilink Prime) has a TDB at age 55 of PhP1.9mn, higher than Maxilink One fund value of PhP1.6mn. The combo policy TDB (PhP1.9mn) may be lower than the standalone Maxilink Bright TDB (PhP2.4mn), however, by giving up some protection value in the earlier years, you are generating significant wealth accumulation and transfer values in the latter years. (SEE AREA IN RED) If the client reaches age 88, the combo policy has a total fund value of PhP15.9mn vs the Maxilink Bright fund value of PhP10.6mn!
• HIT THREE BIRDS WITH ONE STONE WITH A COMBO MAXILINK ONE PLUS MAXILINK BRIGHT POLICY -- (1) PROTECTION, (2) WEALTH ACCUMULATION, AND (3) WEALTH TRANSFER!
• IT TAKES A SMALL AMOUNT TO MAKE BIG DIFFERENCES IN LIFE!
Credits to Sir Mike Manuel!
