Pacific Life Policy Performed 22%

[Tahoe Ray]

I am still trying to work out the math of Getting and Keeping a Life Insurance license in California for the sole purpose of selling one policy - to yourself.
What is that about $188 a year, plus E&O, plus a GL policy. [Not considering CE]
That has got to be about a $1,000 a year or so? But for 14 years.
Admittely - you have received commissions.

I am not asking, and I do not want to know the exact details, but this is fascinating to me..

Good Luck.

Only selling one policy would be inexpensive because you'd just drop all of that stuff after it issued.

You're not going to sue yourself, you don't need to be appointed to access the policy because you own it, and you can just let your license lapse.

It's why some carriers won't appoint you for just a conversion or controlled business.

At 10k/yr, he probably made 3-4k (maybe a little more since Pac has some of the largest targets out there...which makes them pretty popular.)

If you can do it, it's worth it.

 

[Allen Trent]

$70k in and pull $70k out as a loan, am I not in a risk-free position?

No, not completely risk free. That $70k loan will compound to $250k or more over 30-40 years. If it lapses or surrendered you would owe income taxes on all the amount over your $70k cost basis. The IRS counts all the interest added to the loan balance as gains in the taxation calculation

You are not pulling out the money. You are borrowing the carriers money & they take a collateral position on your cash.

Also, why would you want 3 or 5 of these if you have room to keep plowing into 1 contract. Keep paying on the ones with premium room before looking at more contracts

 

[ejbarraza]

I would hope 5-7%.

However, the illustration software must have a broken calculator. It says it is using 5.18% to project values (non-guaranteed. If in year 19, it projects $275,606 to be the beginning CV, shouldnt the real world return of 5.18% make the following year CV be $289,883? where did the other $4,620 of 5.18% returns go? this projection sure appears to show about 3.5% real world return in year 19/20-----assuming it grossed 5.18% & no internal fees or cost of insurance has changed.

View attachment 7980

Are we going to hold our nose up that $70k can turn into nearly $300k without downside risk? Is that not in and of itself insane! If I loan you $70k will you pay me back $300k tax-free with zero default risk? I guess I have low expectations for returns.

 

[Tahoe Ray]

You get what you pay for right?

Um...no.

Pac is really popular because the way they blend their products makes their targets artificially high. They also treat new contracts (illustrations) very different than the inforce block after a period of time.

I had an agent with a really nice case (100k+) and he really likes commissions. I sent him several carriers that were all competitive with each other. Guess who paid the most? Pac by a mile.

If you believe that the music will keep going and/or you'll still have a chair, awesome.

Really high expenses, high targets, aggressive crediting on new contracts, and carrier flexibility to hose you leave you wide open.

You're smart to diversify between several carriers. That can work. Just make sure that you're not saving all (or even half) of your money in insurance products.

 

[ejbarraza]

No, not completely risk free. That $70k loan will compound to $250k or more over 30-40 years. If it lapses or surrendered you would owe income taxes on all the amount over your $70k cost basis. The IRS counts all the interest added to the loan balance as gains in the taxation calculation

You are not pulling out the money. You are borrowing the carriers money & they take a collateral position on your cash.

Also, why would you want 3 or 5 of these if you have room to keep plowing into 1 contract. Keep paying on the ones with premium room before looking at more contracts

Are we forgetting the asset side of the ledger? Of course, the cash value will compound faster. And I am assuming I never withdraw a penny from the insurance policy and merely pledge it as collateral for a cross-collateralized secured business line of credit. At Prime minus 100 basis points and 75% loan to value. Quarterly interest-only and all my income is deposited into the line of credit every two weeks. I have multiple policies because I want diversification of index options. For instance, F&G's IUL has a 4.75% fixed interest account and a monthly 4% cap. Nationwide's proprietary volatility controlled indexes. PennMutual's 5-year index and 1.1% floor rate and so on.

 

[Tahoe Ray]

Are we going to hold our nose up that $70k can turn into nearly $300k without downside risk? Is that not in and of itself insane! If I loan you $70k will you pay me back $300k. total with zero default risk? I guess I have low expectations for returns.

How about I loan you 70k and promise you I'll pay you back 300k but I can change the terms at any time throughout the loan?

And, if my financial circumstances change, I can just take a bunch of that 70k back, making your 300k much less?

You have downside risk in IUL. Not a ton if max funded (as far as the policy not lapsing and you get your money back) but it exists.

 

[ejbarraza]

Only selling one policy would be inexpensive because you'd just drop all of that stuff after it issued.

You're not going to sue yourself, you don't need to be appointed to access the policy because you own it, and you can just let your license lapse.

It's why some carriers won't appoint you for just a conversion or controlled business.

At 10k/yr, he probably made 3-4k (maybe a little more since Pac has some of the largest targets out there...which makes them pretty popular.)

If you can do it, it's worth it.

Not even close. I make $355 total. $40k base and $145k term blend. The expenses are also not bad after year 10. $160 is worth what they are giving me in return.

 

[marindependent]

Only selling one policy would be inexpensive because you'd just drop all of that stuff after it issued.

You're not going to sue yourself, you don't need to be appointed to access the policy because you own it, and you can just let your license lapse.
....
If you can do it, it's worth it.

Yes but - if you drop your license and then by definition - hence your E&O coverage.

That would very much conern me.

 

[Tahoe Ray]

Nationwide's proprietary volatility controlled indexes.

Everyone has those. They are proprietary because the carrier wants to control risk (via less volatility making options less expensive) and they build-in fees to the index.

For instance, F&G's IUL has a 4.75% fixed interest account and a monthly 4% cap.

Monthly caps don't normally lock in. I don't sell F&G IUL but most of those products will net you out at your policy anniversary. 4% 5 months in a row, great! -20% the next month, you're back to zero.

Any why would you want a fixed interest account on something you'll own almost forever when you can get a similar guarantee on a 7-10 year and be done basis?

 

[Tahoe Ray]

Not even close. I make $355 total.
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For a 10k/yr max funded policy?

Your attachment doesn't work but expenses don't equal commissions...you know that, right?

EDIT: NVM, I can see it in your post. You just took levelized commissions then? Do you get that every year for the first 10 years?