Dividends

[leo]

I read on a Facebook group that loans on PUA don't get dividends, is that correct?

 

[scagnt83]

I read on a Facebook group that loans on PUA don't get dividends, is that correct?

Varies on the carrier. You are referring to Participating Loans vs. Non-Par Loans.

However, many non-par carriers just give an adjusted Dividend on Loaned funds. So it still gets something.

Read the illustration.

 

[Allen Trent]

I read on a Facebook group that loans on PUA don't get dividends, is that correct?

Couple things.

1. No cash value is ever loaned out of a policy. All the cash vslue stays in the policy & the insurance company gives the owner a loan from the insurance companies assets. Insurance company takes a collateral position on the policy until loan is repaid by owner, extinguished at death or surrender.

B. Each carrier decides as to whether they pay the same or lower dividend rate on base cash value & puar value

3. Each carrier decides whether they pay the same dividend scale on policy values not hindered by a carrier collateral position or a lower dividend scale on those values collaterized by a loan from carrier.

In short, Facebook group may be correct depending on what specific carrier, what product, etc

 

[marindependent]

Couple things.
In short, Facebook group may be correct depending on what specific carrier, what product, etc

Varies on the carrier. You are referring to Participating Loans vs. Non-Par Loans.

Both of these professionals are a much better source of information than Facebook.

 

[AmyDurso]

Ok, thank you sir for the info. I will keep it in my mind.

 

[Lloyds of Lubbock]

Lets stick with par policies as they are more common.
Two ways a loan can be priced are:
Direct Recognition
Variable loan interest rate.
Direct recognition means that the policy recognizes there is a loan on the policy and makes an adjustment on the dividend. Currently most Direct Recognition companies are paying a higher dividend on loaned money, than non-loaned money.
If interest rates continue to rise this may reverse itself.
Direct Recognition companies also have fixed interest rates, and some give you the ability to switch from Direct Recognition to Variable.
Variable loan interest rate method has a current rate of interest that is tied to an index, which periodically is adjusted. The policy gets the same dividend regardless of whether or not there is a loan.
Which one is better? Long term they are probably just the same.
When taking a loan from a policy you may want to use a third party lender, you generally get a better interest rate. IN this case it really does not matter.
Here is a specimen policy from Guardian look at page 12 first bullet point under Dividends.
A loan affects the dividend payable. (Also on page 10)
It does not say loans are not eligible for dividends, or dividends are lower because of loans.
The attached file is taken from a specimen policy from a Direct Recognition company.

 

[walthamny]

Not to hijack the thread but it seems like there are less than 500 life insurance agents who understand that overall there is not a huge difference in the long run from direct to indirect recognition.

 

[Lloyds of Lubbock]

When you have a company previously known as Ohio Natl putting on their homepage, We are not a Direct Recognition company and loans do not affect dividends" what do you expect?
While it may be a true statement what do you think they were inferring?

 

[walthamny]

When I was at NY Life I was told NorthWestern wasn't financially strong enough to offer what NY Life did with their dividends. But Ohio National went further in dishonesty than any other I have seen.