Whole Life 1st Year Liquidity

[Norwayguy]

SC, thanks for the reply., my original question was motivated to better understand the power of using premium financing with interest arbitrage oportunitys to create a life long valuable contract for little or no cost. The key being HECV to pay off the financing principal at the time most advantageous to the future contract value.
To me liquidity means easily acessed, no more, no less.

I realize this is an extremely limited market.

To quote Rick Blaine from TPG... Do you have a prospect for this approach?

 

[scottstreet]

Peter, No, not currently. But I live in a fertile environment for it. Thus, I'm interested in understanding the mechanisms. Insmark does quite a bit on this subject but Ritter dosen't do the designing, he farms it out to Bob Strauss @ SFI..

 

[scagnt83]

SC, thanks for the reply., my original question was motivated to better understand the power of using premium financing with interest arbitrage oportunitys to create a life long valuable contract for little or no cost. The key being HECV to pay off the financing principal at the time most advantageous to the future contract value.

Generally speaking, I am not a fan of premium financing.


Here is my issue with the comment in bold:
There already is little/no cost to owning a WL/UL.
Over a 10-20 year period, if you are in the red, something is wrong.
The only real cost is the expense inside of the policy.


I do understand the point of premium finance.
But often it is used so that the client feels like they arent "paying for insurance". And imo when that happens it is a bad thing.

The problem with premium finance is that you have to pay the PF Loan back with loans from the policy, which just lowers your CV, often early on in the life of the policy.

I feel it is better for the client to have a policy without any extra load on it. It allows them to use it to a greater extent in the future.



If you have a natural market for this then try just selling the tax benefits of permanent insurance first. The prospects that are suitable for premium finance are the ones who appreciate the tax benefits of it the most!
No risk of loss, with average 3%-5% tax free returns, is equivalent to around a 5%-9% taxable return.
And most taxable vehicles that are able to average 5%-9% come with a risk of basis.

That alone is enough to market it to an affluent crowd.


Also, the comp is not nearly as nice as you think it is on a PF case... LOTS of hands in the cookie jar.

 

[LGilmore]

"To me liquidity means easily acessed, no more, no less."

Scott? sort of a different statement here than the others.

Easily accessed? Trust me... real easy Just a phone call or email. wired in about 48 hours or 5 days via mailman. Personal experience with this.

Your cash values are easy to get to, but hard enough to think twice about being willy nilly about it. I have pulled out and put back several times over the decades. Works great that way.

That is a different aspect of a policy from when you first posted. Much easier to answer.

 

[scottstreet]

Larry, I think you read into my post something that never existed. My concern for liquidity never said anything about taking it out willy nillly or fast. Rather my interest is in premium financing models.

 

[BNTRS]

I don't understand why we would discourage early access to cash. That's not to suggest that life insurance become a short term savings plan (it's not) but if we can take the same premium dollars and make 60% or more of the premium available as cash value in year one, while improving the policy's performance long term as well I see no reason to suggest someone do something otherwise.

Such a thing is easily accomplished through blending.

As for the original question, and it's intended application (premium financing) we're not so much worried about accessing the cash for anything, just giving the bank adequate collateral.

There are various ways to approach this. HECV products are an obvious choice since they make so much cash available from the start, and generally speaking cash surrender value isn't much of a concern for a premium financing situation, a pseudo arbitrage into effectively free life insurance is.

SCagent is correct when he points out that realistically life insurance can be thought of as essentially free over a long enough period of time given the positive return on cash value. However, the allure to premium financing is that the PI have very little to no outlay for which they have to commit. Instead they simply use the bank's money to purchase life insurance and then retire the loan with the policy when the time comes.

I'm afraid realistically you have to approach this question from a different angle. The primary reason is due to carrier picky-ness when it comes to premium financing. Many carriers restrict the lender and in many cases the product or design that is used for a premium financing case. So simply coming up with blended designs that show more first year CSV may be for naught if the carrier rejects that product or design for premium financing.

 

[LGilmore]

Scott when you said a few more words about what you meant, it was much clearer. Sorry for misunderstanding your first post. Your clarification improved your meaning.

 

[scottstreet]

"The primary reason is due to carrier picky-ness when it comes to premium financing. Many carriers restrict the lender and in many cases the product or design that is used for a premium financing case." Got it. Now I understand why Insmark/Ritter uses Bob Strauss- banking relationships specific to PF.