Life Insurance Loan

[LaffAgent]

I would be curious if sman, chumps or others who had been in the life business for any length of time have ever know of a situation were a policy holder had to pay cash to surrender a policy.

I've been a life agent for 17 years and to the best of my knowledge, this can't happen. I will add a caveat that I do business exclusively in New York. Every once in a while I come across something in a Non-NY policy that can't happen with a NY policy.

 

[Dave020]

back in the early 90's, one very well-known company had agents selling plans using dividends from one policy to pay premiums on another policy. The other thing they did was short-pay plans 5 years and so on by overfunding on the front end. Many policies did implode and create taxable events for clients...I spent three years with said famous mutual carrier located in Milwaukee and known to be "quiet".

Check for yourself, here are a few names that might help you understand how these things can and do happen:

David Stinnett
Dan Burnett
Tom Lipscomb

Dave

 

[somarco]

Taxable event upon surrender happens. Mini dipping policies, borrowing from one to pay another, vanishing premium . . . all of these are gimmicks from the past.

Angwagner claimed she knows people who had to "cut a check to the insurance company to get out of them."

If the surrender creates a taxable event, you do not cut a check to the carrier for the tax liability.

Either angwagner is missing some facts or this is a situation no that apparently one else has experienced.

 

[Dave020]

I think angwagner meant check to keep the policy in force?

 

[somarco]

I think angwagner meant check to keep the policy in force?

Well perhaps she can clarify for us . . .

There is way too much misinformation on this site and a lot of rookies who don't know what to believe (or who).

 

[LaffAgent]

Angwagner? Clarification please?

 

[James]

This is the type of policy I am talking about http://www.nmfn.com/tn/insprods--life_ninetylifepg

Well look at this paragraph:

Policy Loans

You may borrow from the cash value of the policy. Loans may be taken at a fixed 8% interest rate, or a variable loan rate determined annually. The amount borrowed from the cash value affects the amount of dividends you will receive. Any unpaid loans, along with accumulated interest, will be deducted from the proceeds at death or if the policy is surrendered prior to death. Within contractual limitations, there is a maximum value that can be borrowed that is less than the total cash value of the policy.

You see, now this is very common. The Life Carrier will IMHO never allow you do put them in a position they have more out than you have with them, obviously this is for their protection.

 

[senior-advisor-indiana]

I had a client that was repaying a loan from her policy, it was a variable annuity that she borrowed 14k from. The face value of the policy was 60k. When she rolled it to another annuity she had to pay the loan off 1st and the amount rolled was 46k. So I guess you could say she had to pay to roll it but like James said they wouldn't be in a position where you would owe more than what you have in the account. Of course annuities are a little different.

 

[CHUMPS FROM OXFORD]

I have never encountered, or heard of, a policy accumulating so much debt as to require the policy holder to pay money to the carrier to terminate the policy. I suppose it could happen with a non-par policy, but I doubt it. The policy would most likely self implode before it ever got in a negative position.

I think someone has their facts wrong.

I would be curious if sman, chumps or others who had been in the life business for any length of time have ever know of a situation were a policy holder had to pay cash to surrender a policy.

I just noticed this thread. And no...I have never seen a situation where someone had to pay money to terminate the policy. Taxes, of course, are another story.

The concept was called "Minimum-deposit-life" and it often involved borrowing cash and withdrawing dividends to pay the premium...often as early as the second year.

 

[James]

Which brings up the difference of UL's and WL contracts, yes in a UL you can face higher premiums base on many situations such as loans and mortality cost which can not happen with Par WL contracts. Yet if one is going to use the vehicle heavily in Loan Usage I suggest UL's as in they have the best Loan Provision in most cases. Yet you can not low ball the premium, this is where people get caught up in the Lapsing of a contract. Lo balling the cost of UL's including secondary guarantees will catch up with the client and yourself sooner or later.