Whole Life

[goillini52]

Ok, I have another question. If you take a loan for say 10k on a 50k face and never pay it back. Would the DB be 50-10 or 50-10+interest on the loan?

That would be correct...but the loan is taken out against the cash value, not the face amount. The loan value is the same as the cash value. You'll see it listed as cash or loan value in the policies non-forfeiture values.

 

[smokin goose]

And the amount of the dividend is contingent on the company's profit. Is that paid out annually I assume? Also can the option for dividend designation be changed during the policy?

And what about the loan question?

 

[goillini52]

And the amount of the dividend is contingent on the company's profit. Is that paid out annually I assume? Also can the option for dividend designation be changed during the policy?

And what about the loan question?

We posted at the same time.

 

[DHK]

Yes and no because the answer to your question is "depends". Dividends with most companies have several options a person can elect if they choose. They can be taken as a tax free cash refund, they can be set aside in an interest bearing account, they can purchase PUAs and they can be used to reduced premium for a few examples.

Dividends are sill putty.. you can make them do just about anything you want them to.

I love reducing the premium or premium offset when I mess with primeamerica people because those are the cheapest options for the longest duration of insurance coverage. One ends the need for external premiums after 15-16 years (yea, I know premium offset isn't guaranteed, soooo just add a couple years to the premium schedule and you're golden.) and the other makes the premium cheaper each year and can be structured to zero later in the policy's life.

Then they PAY you to keep the policy!

 

[smokin goose]

That would be correct...but the loan is taken out against the cash value, not the face amount. The loan value is the same as the cash value. You'll see it listed as cash or loan value in the policies non-forfeiture values.

Right, I knew the loan comes from the CV. So assuming it will never be paid back, the DB will decrease according to the new interested owed every year??

 

[VolAgent]

Right, I knew the loan comes from the CV. So assuming it will never be paid back, the DB will decrease according to the new interested owed every year??

To be precise, the CV is used as collateral for the loan. And if you don't repay the loan plus interest, then they will use the collateral to pay it back. In this case, it will be the death benefit.

 

[goillini52]

Right, I knew the loan comes from the CV. So assuming it will never be paid back, the DB will decrease according to the new interested owed every year??

Wasn't sure by the way you wrote it. Yes, the face amount/DB will be reduced by the amount of any loan not paid back plus interest.

 

[smokin goose]

Yeah, I'm having trouble asking the question. Lets try this.

Lets say a guy is 40. He takes a 10k loan. He dies at age 50. He never made payment on the loan. Is there new interested added every year (for the ten years) or is there a one time interest charge added at the time of the loan?

 

[VolAgent]

Yeah, I'm having trouble asking the question. Lets try this.

Lets say a guy is 40. He takes a 10k loan. He dies at age 50. He never made payment on the loan. Is there new interested added every year (for the ten years) or is there a one time interest charge added at the time of the loan?

Interest is charged every year.

 

[TwiLight]

Yeah, I'm having trouble asking the question. Lets try this.

Lets say a guy is 40. He takes a 10k loan. He dies at age 50. He never made payment on the loan. Is there new interested added every year (for the ten years) or is there a one time interest charge added at the time of the loan?

Interest accumulates annually and is compounded annually. So it will eat away the Face over time. An average loan rate is 6% so, in your example the loan will have $600 in interest added to the Loan since it was not paid. Thus, the 6% will be on the 10,600 the next year and so on and so on.

Now a neat feature with a bunch of companies is to use the dividend to pay down the loan. This is a Big "It Depends" if this is a good idea. You see, it all depends on the company and dividend scale. It may better the client to keep using PUA's to get higher dividend later on.

To learn quickly on this product. Contract with a good company and talk with the upline on getting you software. You can learn alot playing with the illustrations and using a lot of What If's in the process to learn and get new questions for your upline. Hopefully your Upline will be considerate to your learning curve....