I have a 51 type 2 diabetic never took meds a1c 6.0 no other health conditions good weight non-smoker he has been a diabetic for 20 years he wants to do infinite banking plus wants access to most of the cash right away that he puts in if he needs it. He wants to put in approx 50K Which carriers do you recommend: Guardian, Lafayette Life, Ameritas, Security Mutual, Ohio National. He has no relatives I can put this on or employees. What type of rating would he get?
Infinite Banking and Type 2 Diabetic
- Thread starter SamIam
- Start date
- 10,330
The concept of having large up-front liquidity and infinite banking do not go hand in hand.
WL is traditionally used for IB. Best case scenario you have in the neighborhood of 70% of first year premium as CV... and thats with a good health rating.
IUL can get a higher % of CV in y1. But IUL does not provide the consistency that the original IB concept (by Nelson Nash) uses as its foundation. (negative or flat years means no positive interest arbitrage)
To find the best carrier, first evaluate the clients health vs. each carriers UW Guidelines (many can be found via google, or go to carriers agent portal, or ask). All are slightly different and there is no standard answer across the board for each client when major health conditions are involved.
Then, using the expected health rating, compare illustrations from each carrier.
Please keep in mind, IB is just a concept around how to utilize the features of a WL policy. Its a fancy sounding wrapper that might get a persons attention, but is just a method to explain one of the ways a consumer can utilize their WL policy.
Also, IB has received a really bad rep over the past few years because of certain organizations pushing unsound financial concepts surrounding it. Often advising in their book to take out loans or 2nd mortgages to pay for the policy. The original concept by Nelson Nash did not push any of that.
Ive found much more success in a more simple and straightforward explanation of the potential of a WL policy. No fancy wrapper needed when the product is solid. And you should add Mass and Penn to your list of WL carriers.
WL is traditionally used for IB. Best case scenario you have in the neighborhood of 70% of first year premium as CV... and thats with a good health rating.
IUL can get a higher % of CV in y1. But IUL does not provide the consistency that the original IB concept (by Nelson Nash) uses as its foundation. (negative or flat years means no positive interest arbitrage)
To find the best carrier, first evaluate the clients health vs. each carriers UW Guidelines (many can be found via google, or go to carriers agent portal, or ask). All are slightly different and there is no standard answer across the board for each client when major health conditions are involved.
Then, using the expected health rating, compare illustrations from each carrier.
Please keep in mind, IB is just a concept around how to utilize the features of a WL policy. Its a fancy sounding wrapper that might get a persons attention, but is just a method to explain one of the ways a consumer can utilize their WL policy.
Also, IB has received a really bad rep over the past few years because of certain organizations pushing unsound financial concepts surrounding it. Often advising in their book to take out loans or 2nd mortgages to pay for the policy. The original concept by Nelson Nash did not push any of that.
Ive found much more success in a more simple and straightforward explanation of the potential of a WL policy. No fancy wrapper needed when the product is solid. And you should add Mass and Penn to your list of WL carriers.
- Thread starter
- #3
I fully agree with your statement about taking out loans to fund the statement. I like Mass a lot but from me speaking to them you can't take out money the first year. I've seen other carriers where you are.
But anyway I was just trying to get an insight into what carrier might be the best with type 2 with no meds.
But anyway I was just trying to get an insight into what carrier might be the best with type 2 with no meds.
- 4,576
I think you are missing the point scagnt83 is making. putting that much money in up front will be a Modified Endowment contract causing tax consequences on forever on distributions including loans or even pledging it as collateral at a bank or ownership changes. Between up front load fees, policy fees, making it a MEC, this could spell trouble for the client.
Likely a better idea is to use a PDA account with the carrier to receive the balance of the 50k that cant go in the policy in year 1 with the balance of the 50k going into the policy over 5-10 years as more room opens on the MEC calculation. most PDA accounts are paying 2-3% while held in the PDA "bank" account. money can still be taken out in an emergency from the PDA account if needed (not ideal because you forfeit the interest if they money never makes it into the actual life policy)
- 11,277
Doing a home mortgage refi can still be a good idea - particularly for freeing up cash flow by paying down other debts.
I would be VERY careful about the idea of putting cash out loan proceeds into life insurance. Some companies WON'T LET YOU do that due to abuses of the concept in the past. @Allen Trent talked about making the policy a MEC? The abuses didn't do that. They make it all target premium to maximize commissions and then the policy lapsed the next year or so... and they did Adjustable Rate Mortgages too. They really screwed the client over.
Like everything in finance, learning the proper ways to maximize a client's situation is a great thing, but there are extremes that should be avoided.
I would be VERY careful about the idea of putting cash out loan proceeds into life insurance. Some companies WON'T LET YOU do that due to abuses of the concept in the past. @Allen Trent talked about making the policy a MEC? The abuses didn't do that. They make it all target premium to maximize commissions and then the policy lapsed the next year or so... and they did Adjustable Rate Mortgages too. They really screwed the client over.
Like everything in finance, learning the proper ways to maximize a client's situation is a great thing, but there are extremes that should be avoided.
- 4,576
also, cant locate it currently, but I believe there are some IRS regs that dont allow mortgage interest to be deducted if the proceeds were used to buy life insurance. Those could have been old regs about Life insurance like you mentioned in those ARM issues above in the 125% LTV days. saw some sad cases of MEC VUL bought with 125% loans to qualify for college financial aid only to have the house values plummet in 2008, the VUL cash values plummet, etc.
today, I believe HELOC mortgage interest is only deductible if the money borrowed is directly spent to improve the home. So, HELOC to even pay down credit cards, buy life insurance, buy boat, etc would be a denied deduction in an audit from the way I understand the current IRS regs on deductibility of mortgage interest
not an issue for most people considering 70-80% of population now takes the standard deduction & cant itemize anything anymore.
- 11,277
True. IRS publications 936 (home mortgage interest deductions) and IRS publication 550 (investment income and expenses) have conflicting information in them regarding the use of home equity for "investment" purposes and having the interest being tax-deductible.
However, life insurance is life insurance, not an "investment"...
But the rates are so low and the standard deductions are so high, that it's almost a moot point anyway at this point. It's just a smart way to leverage assets - if it's done prudently.
BUT... if you borrow against your life insurance for the purpose of profit (a business enterprise or real estate to flip, etc.), then the interest you pay would be deductible as a business expense!
However, life insurance is life insurance, not an "investment"...
But the rates are so low and the standard deductions are so high, that it's almost a moot point anyway at this point. It's just a smart way to leverage assets - if it's done prudently.
BUT... if you borrow against your life insurance for the purpose of profit (a business enterprise or real estate to flip, etc.), then the interest you pay would be deductible as a business expense!
