The P.I.D.O. System
Pennies In. Dollars Out.
Take the cost to its smallest honest unit. Set it against the largest honest benefit.
Most families never see the leverage inside a policy because the cost is quoted by the month and the benefit is quoted by the lump sum. The two numbers never sit next to each other. P.I.D.O. puts them side by side.
This is a general market framework. For families building from income, the daily number opens the door. The affluent leverage frame is a different doorway for a different room. Use the right one for the person in front of you.
Four letters, four moves
Reduce the premium to its smallest true unit. Not the month. The day. $110.85 a month becomes $3.70 a day. A number a family already spends without thinking. The point is not that it is cheap. The point is that it is small enough to feel real.
Show where the pennies go and what the family has to do. The premium goes to the carrier. Consistency is the only job. Keep the policy funded and in force, and the structure holds. Nothing flows from the family’s pocket to the agent. The carrier compensates the team.
Name the benefit in full. $250,000 of protection, in force once the policy is approved. Write the whole number. Let the family see the distance between what goes in and what comes back out. That distance is the leverage.
Here is the part most families never hear. The money goes in one way and can come out many ways. One premium. Multiple exits, depending on the riders and the policy type. The death benefit is one door. It is not the only door.
One way in. Many ways out.
The input is single and simple. One premium, paid consistently. The output is where the policy opens up. What comes out, and how, depends on the riders attached and the type of policy.
Paid to the family if something happens. The foundation. Every other exit is built on top of this one.
On policies that carry them, a portion of the benefit can be accessed while living if a qualifying event occurs. Terminal illness. Chronic illness, when a person can no longer perform the basic activities of daily living. Critical illness on some policies. These are not automatic. They depend on the rider being in place and the condition being certified.
On a permanent policy that builds value, the family may access that value while living, through the policy terms. Tax treatment depends on how the access is structured.
Yes, the living benefits draw from the same benefit. That is not a catch to hide. It is the design to teach. We carry life insurance, not death insurance. Life has more reasons to need money than death ever will.
The living benefits serve the family while they are here. Whatever is not used serves the people they love, who are still here after they are gone. Use the doors you need while living. What remains passes to the living. Every dollar that comes out serves someone who is alive.
I am come that they might have life, and that they might have it more abundantly.John 10:10 (KJV)
One quote, the whole story
Male, age nearest 30, standard non-tobacco. Death benefit option A. This is the actual quote.
The family is protected for roughly 188 times what is paid in during the first year. At $3.70 a day, it would take about 185 years of premium to equal the benefit. He would have to live past 200 to pay in what his family receives. That is the leverage, in one sentence.
Figures are specific to this illustration and depend on age, health, carrier, and underwriting. Actual results vary.
Why this one also grows
This quote is an indexed universal life policy. The cash value is credited based on the movement of an index such as the S&P 500. The policy is not invested in the market directly. The family does not own the index and does not receive its dividends.
Two numbers govern the credit. A cap or participation rate sets how much of an index gain is credited in a strong year. A floor, often zero percent, protects the credited interest in a year the index falls.
A variable policy puts the account value directly in the market, so it can lose value when the market falls. An indexed policy uses the floor so a down year in the index does not subtract credited interest.
Say it plainly to the family. In a good year, the policy shares in the gain up to a limit. In a down year, the index loss does not pull the credited interest below the floor. Policy charges still apply every year, so the value can still move. Growth is potential, never promised.
Two quotes, one chart, the conversation that picks the tool
This is the visual for a family that believes term is the only answer because the face amount is bigger. Show what goes in. Then show the one line that changes the decision. The term stops at 60, and most people outlive it. Walk them across the chart and let the gray line do the talking.
Total premiums paid, age 30 to 100, no interest counted
This is only the money going in. No growth, no cash value, no interest. Just the dollars paid in each year, added up.
The term line goes gray after age 60. The premiums stop, and so does the coverage. The permanent line keeps climbing because the coverage never ends.
Cumulative premiums paid in
| Year | Age | Permanent in | Term in | Term coverage |
|---|---|---|---|---|
| 1 | 31 | $1,330 | $1,642 | $1,000,000 |
| 5 | 35 | $6,651 | $8,210 | $1,000,000 |
| 10 | 40 | $13,302 | $16,421 | $1,000,000 |
| 20 | 50 | $26,604 | $32,842 | $1,000,000 |
| 30 | 60 | $39,906 | $49,262 | $1,000,000 |
| 40 | 70 | $53,208 | $49,262 | none |
| 50 | 80 | $66,510 | $49,262 | none |
| 60 | 90 | $79,812 | $49,262 | none |
| 70 | 100 | $93,114 | $49,262 | none |
This chart assumes a level death benefit. That is the Option A solve shown on the quote. It holds the $250,000 every row to age 100 and beyond. An IUL can also be solved for an increasing death benefit. With that solve the death benefit grows over the years instead of staying flat. Either way the policy builds cash value the family can use in the later years. This chart does not show that value. It counts only what goes in.
Both have leverage. They are not the same leverage.
Term. About $4.56 a day. If death occurs before age 60, the family can receive up to $1,000,000 for as little as $49,262 paid in. That is roughly 20 to 1. But most people outlive a 30 year term. If they do, the coverage ends at 60 and the family receives nothing from it. It is the most coverage for the fewest dollars, and it is built to expire.
Permanent. About $3.70 a day. The $250,000 never expires, and depending on how it is solved the death benefit can hold level or grow over time. By age 100 the total paid in is about $93,114, roughly 2.7 to 1. The ratio is smaller, but the policy pays whenever the day comes, because it does not end. It also serves the family while living, through riders and cash value, which the term does not.
Term covers the family, and only the family, and only if death comes inside the window. It is a death benefit for a season. Permanent covers the family for life and serves the household while living.
The honest way to hold both. Term buys the biggest shield for the years a family carries the most weight, young children, a mortgage, an income to replace. Permanent builds the floor that never moves. Many families carry both, term for the temporary mountain and permanent for the permanent need.
The conversation, word for word
Put the quote in front of them. Then slow down and let the numbers do the work.
“Let me show you something. This is you. Thirty years old, healthy, no tobacco. The number at the bottom is three dollars and seventy cents a day, once you are approved.”
“You spend more than that without thinking about it. The difference is, this three dollars and seventy cents does a job. If something happens, your family does not lose the house, the income, or the time to grieve. They receive two hundred fifty thousand dollars.”
“You put in pennies. They receive dollars. That is the whole idea. And it goes in one way but it can come out more than one way. The death benefit is one door. Depending on how we build it, there are living doors too, if a serious illness ever shows up while you are still here.”
“This is not death insurance. It is life insurance. It works for you while you are here, and for the people you love when you are not. Either way, it serves the living.”
Then stop talking. The leverage closes the distance on its own. Your job was to put the two numbers in the same sentence.
The kingdom of heaven is like to a grain of mustard seed… which indeed is the least of all seeds: but when it is grown, it is the greatest among herbs.Matthew 13:31-32 (KJV)
The smallest seed, the greatest growth. Pennies in. Dollars out. The pattern was here long before the illustration software.
This material is for educational purposes. Figures shown are from a single illustration and are specific to the age, health class, carrier, and underwriting of that case. They are not a quote, an offer, or a guarantee. Actual premiums and benefits vary.
Indexed universal life cash value is credited based on an external index and is not invested directly in that index or in the stock market. Credited interest is subject to caps, participation rates, and spreads set by the carrier, which may change. The floor protects credited interest from index declines. It does not protect the account value from policy charges, cost of insurance, or fees, which apply every year and can reduce value. Growth is not guaranteed. The death benefit may be level or increasing depending on the option solved for, and the policy builds cash value that may be accessed in later years, subject to the policy terms.
Living benefits and riders vary by policy and carrier and are not included on every policy. Access requires the rider to be in force and the qualifying condition to be met and certified. Accelerated living benefits reduce the death benefit, and may reduce or eliminate cash value, by the amount accessed. Amounts taken while living lower what passes to the family.
Coverage begins only after the application is approved, the policy is issued, and the first premium is paid. Coverage remains in force only while required premiums are paid. Benefit payment is subject to the terms of the policy.
Death benefit and cash value tax treatment is based on current law and depends on how the policy is structured and funded. Consult a licensed tax professional.
Products and features vary by carrier and state. Speak with a licensed agent for details specific to your situation.
