Loan vs Surrender in Whole life

Jun 10, 2019

  1. Allen Trent
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    that math problem cant be solved without knowing how much in total can be surrendered. base policy cash values cannot be partially surrendered, they must either be borrowed or the policy fully surrendered. Only PUAR values bought with PUAR premium or PUAR values bought by dividends can be partially surrendered. so, you would need to know how much of the $1M cash value is base cash value & how much in PUAR values.

    I have always been a fan of partial surrenders if the person has no intention to repay & the larger death benefit reduction is not of great concern. Basically, surrenders/withdrawals to basis until basis fully recovered, then loans.
     
  2. Lloyds of Lubbock
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    A face amount reduction will also release money that can be withdrawn.
    As far as your example.
    Withdrawals after basis will be taxed, you can do a double surrender to withdraw for income and to pay the tax.
     

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  3. Lloyds of Lubbock
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    to basis and borrow
     

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  4. Allen Trent
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    do most of the carriers you write WL with offer partial face reductions? just curious how common that is. I have not seen it executed very much on policies clients could no longer fully fund & instead of an agent helping someone do a face reduction, I see policies getting destroyed with Automatic Premium Loan borrowing from itself to pay the premium. great feature if it is allowed like you mention. Good to know. Thanks
     
  5. Lloyds of Lubbock
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    We never have a problem with a face amount reduction.
    Many time smeone comes to us with a loan we are able to payback with a face reduction.
    Where it can be problematic is when the face reduction would change the underwriting class.
     
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