Infinite Banking Concept

[DHK]

As far as I know, AIL products are non-participating WL and isn't really used for advanced life insurance strategies, such as "infinite banking", etc. That's like finding a policy that waives premiums on the base policy only - which, until today, I thought that's all that Assurity's DIWOP rider did as well as most whole life policies offered.

Most of the stock companies that focus on IULs seem to be abandoning Disability Waiver of Charges and Disability Waiver of Stipulated Premiums - at least in California. It makes it more difficult to find products that will self-complete, aside from mutual insurance companies, of which, Assurity is one.

I know Guardian has a "Disability Waiver of Stipulated Premiums" (which would cover the entire premium, not just the base policy), but with their high cost of borrowing (8%) and complex dividend options... I'm not exactly a fan.

 

[Ksutton]

Ahh...yes ... I missed the whole boat . AIL is All non par and no UL product . My apologies

 

[david_lewis]

Words mean things, and in the interest of accuracy, when you borrow from a life insurance company, you are not borrowing FROM your policy, you are borrowing AGAINST your policy. The cash value functions as collateral. The insurance company places a lien against the cash value and sends you a check from THEIR account. The COMPANY charges interest on the loan, and when you pay interest on the loan, you are paying the interest to THE COMPANY, not your policy. The fact that your policy continues to grow while the loan is outstanding is irrelevant.

Along the same line, I would never say that because my life policy is growing at 5% and my policy loan is 5% that I have a wash or "zero-net-cost" loan rate. Having an asset on your balance sheet (life policy) that is growing at the same rate as a liability (policy loan) doesn't make it a wash or zero anything regardless of whether the asset and liability are with the same financial institution or not.

That's like saying that my 401(k) earned 5% last year and my mortgage rate was 5%, therefore my mortgage was "net zero". No one would say that.

Yes, I know how policy loans work. I never tell clients they are taking money out of their policy. I tell them they are borrowing the insurer's money, and their policy is collateral.

I think maybe you didn't understand what I meant.

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Very good description.

Death benefit is increasing to keep non-mec in place until the term rider falls off.

Speaking of which...

I experimented on myself with a blended whole life using minimum base + term + PUAs up to MEC. It works great on paper, but maybe not always in the real world. I guess it depends on the company you're running it through.

Those dividends are what support the term rider and my company only allows one dividend option if you use a term blend. As those dividends fluctuate, it changes the term conversion schedule. The illustrated DIR doesn't really prepare you for "real world" dividends either. Even if the company announces the illustrated DIR, your dividends may be lower. This happened to me. My out of pocket term costs went up because dividends were lower than illustrated.

Also... if your client ever has to back off those PUA premiums for any reason, it screws up the term conversion schedule... sometimes in a nasty way.

Now, I can back out of this situation pretty easily by paying more to that term rider to convert it faster but if I had to do this with 100 clients (and explain why), it'd be an administrative headache.

Another thing that I didn't catch until after the fact is the IRR on CVs was lower than without the term blend at older ages (like when I need those CVs for retirement). I'd have been better off using base + PUAs only, despite a lower CV in the first few years. Oh well. Better luck next time. At least I didn't do this on a client's policy.

I know some guys are in love with the term blend, but I've run this with several companies and it doesn't always result in better performance. Depending on the term rider, it can really put a drag on those CVs.

Plus, if you want to do the IBC thing, it's nice to be able to make the dividends pay premiums while you're repaying your loan (or, make the dividends repay the loan). With a term blend, this option might be off the table.

 

[DHK]

The reason you go with a "blended" policy is to meet the death benefit needs. Without a need for a higher death benefit, there's no reason to do a 'blend'.

That said, study your products and perhaps having a separate term policy entirely is better than having a WL blended policy. It will allow the WL (or IUL or whatever) policy to illustrate better and show the term as a completely separate cost.

Whatever works for the company you're wanting to work with.

 

[DWPCL]

The reason you go with a "blended" policy is to meet the death benefit needs. Without a need for a higher death benefit, there's no reason to do a 'blend'.

That said, study your products and perhaps having a separate term policy entirely is better than having a WL blended policy. It will allow the WL (or IUL or whatever) policy to illustrate better and show the term as a completely separate cost.

Whatever works for the company you're wanting to work with.

I would say the reason for a blended policy is to overfund the WL policy and allow early access to cash values. Not for additional death benefit. Assuming we are talking about accumulation being the focus.

 

[pfg1]

I would say the reason for a blended policy is to overfund the WL policy and allow early access to cash values. Not for additional death benefit. Assuming we are talking about accumulation being the focus.

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I would say the reason for a blended policy is to overfund the WL policy and allow early access to cash values. Not for additional death benefit. Assuming we are talking about accumulation being the focus.

I agree. And not all companies offer a way to do this to gain the max benefit from that design.

 

[marindependent]

Its sound too complicated.

 

[TheLifeGuy]

Those dividends are what support the term rider and my company only allows one dividend option if you use a term blend. As those dividends fluctuate, it changes the term conversion schedule. The illustrated DIR doesn't really prepare you for "real world" dividends either. Even if the company announces the illustrated DIR, your dividends may be lower. This happened to me. My out of pocket term costs went up because dividends were lower than illustrated.


Another thing that I didn't catch until after the fact is the IRR on CVs was lower than without the term blend at older ages (like when I need those CVs for retirement). I'd have been better off using base + PUAs only, despite a lower CV in the first few years. Oh well. Better luck next time. At least I didn't do this on a client's policy.

I know some guys are in love with the term blend, but I've run this with several companies and it doesn't always result in better performance. Depending on the term rider, it can really put a drag on those CVs.

Plus, if you want to do the IBC thing, it's nice to be able to make the dividends pay premiums while you're repaying your loan (or, make the dividends repay the loan). With a term blend, this option might be off the table.

David,

I may be misunderstanding your explanation and what you're trying to say but a term conversion (LISR product) and a blended whole life policy are 2 different strategies in my mind.

Correct me here if I'm wrong, but the term conversion is used to achieve a certain death benefit need, has level premiums and the cash value/ dividends go toward paying the term rider down to the "crossover" year in which 100% of the premium from then on goes toward the permanent policy.

A blended whole life policy is an alternative to a standard limited pay whole life policy that uses the least amount of base premium possible, max PUA's, & enough annually renewable term rider to achieve a death benefit that will not cause a MEC. Having designed Penn Mutual and Mass policies, the blended strategy generally has around .5% higher IRR after 40 years and a much earlier positive cash value (generally year 5) as opposed to year 8 or so. In addition, the blended policy (especially Penn's) provide flexibility to fund the amount of premium and the amount of years to fund it, whereas a standard limited-pay whole life policy does not.

One allows a more affordable death benefit need on a permanent life insurance chasis with slower cash accumulation and the other is an alternative asset class that seeks a maximum return on cash values with tax incentivized growth and ultimately allows you to become your own banker.

 

[tomtom4]

MTL has not paid a Dividend to my contact for 2 years now.
They have nixed there cov II product for some New Horizon WL policy ...why??
because its suppose to pay better dividends.

Since 2011 : they have paid 166.32 IN TOTAL dividends !!!

Guaranteed Cash Value: $45,564.27 (8k)
Cash Value of PUA Dividend: $166.32.....

Cost Basis 01/13/2017 $47,981.82

Dividend Earned on 08/13/2016 $0.00

 

[pfg1]

MTL has not paid a Dividend to my contact for 2 years now.
They have nixed there cov II product for some New Horizon WL policy ...why??
because its suppose to pay better dividends.

Since 2011 : they have paid 166.32 IN TOTAL dividends !!!

Guaranteed Cash Value: $45,564.27 (8k)
Cash Value of PUA Dividend: $166.32.....

Cost Basis 01/13/2017 $47,981.82

Dividend Earned on 08/13/2016 $0.00

Something seems off there. Do you have a large loan on the policy?
My MTL policy has earned a div every year. My wife statement came last Friday, and while its a small policy with a loan on it she still got a small div in Dec. All the clients I have with MTL policies got dividends in 2016, as they have every year. ?? I would look into that, something doesn't seem right.

Yes, the new Horizon product is out. It appears to be a pretty decent product which is good for them. All companies introduce new products as they progress forward. Typically they try to improve on what they have. Ohio National and Penn both just introduced new products, its just part of the business as they move fwd keeping up with the times.