Can a Non-HNW individual obtain any value from a LIRP?

[PrivClientSG]

If you know someone at E&Y, or have direct access to their resource material, check out their recent studies on integrating life insurance (whole life is the focus) and other life insurance products (deferred income annuities) into one's retirement plan. Very interesting reading, and very enlightening.

 

[PrivClientSG]

By the way, not that I am going to jump into the debate about "paying loan interest" and "you are paying back yourself" and all those other statements; however, I will say this, there is a reason why policy loans are reported/carried -- on the life insurance company's financial statements -- as (admitted) assets.

A policy loan is carried/reported as this -- as long as at the unpaid loan balance does not exceed the cash surrender value of the policy (or the policy reserves). Remember, the cash surrender value of a whole life policy is not just the cash value.

 

[scagnt83]

So, here me out.

If 2 identical age people buy the exact same policy with same exact premiums for say 30 years & then 1 takes out a 100k loan & the other doesn't take a loan. 24 years later if the person that took the loan pays off that 400k loan, are you saying the person that took the loan & was charged 300k in interest will have more cash value than the one that didn't take the loan?

If not, why not? If the accrued interest is paid back & fully reflected in the case value, wouldn't this be the case.

I know this isn't the case, but having trouble following how a person repaying the insurance carrier back would get the benefit of the accrued interest that compounded.

Instead, I think it is merely reflected that the lender reflects it by removing the collateral attached to the cash value & death benefit. But, the person is not directly benefitting by having a 100k loan turn into a 400k loan balance

More? No.

Same? Yes, if using NDR Loans.

Loan Interest is part of the Cumulative Loan.
That combined amount is a reduction on your Cash Value.

When paid back (assuming NDR Loans) you are making the policy whole again and it will have the exact same CV as if you never took a Loan.

Loan Interest to a bank is a loss. The concept of using NDR Loans is to make yourself not take that loss. It keeps you whole.

Im not saying its good, bad, or otherwise. It is what it is.

Paying back Loans + Interest makes you whole and avoids paying that interest at a loss. (assuming NDR Loans)

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NO LOANS




WITH LOANS