- 14,809
That's a well thought out and intelligent first post - which is heavily discouraged here. If you continue to make sense you'll be subject to being banned.
Premium Financed Life Insurance
- Thread starter 77flanery
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- 924
Maybe it comes from moderating a forum on blogging. As a blogger, you can imagine...kingfish71
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vaughn siller is absolutely correct in al his posts. i cannot believe all of the people who are in the business, aND DONT know of this strategy., even people who claim they are advisors. there are a lot of people out there who qualify for this., they are not a sale that occurs every day, but when they do they are a home run.the secret is to always be working on the pipeline.
- 149
Wow...ok so I read through all 9 pages of post. There seems to be much confusion as to what these programs are and how they work (with a few exceptions). I work for a BGA (brokerage General agency) which has actually been mentioned twice on this thread already. I am not an agent...it is my job to advise, train and help agents with there cases.
The program you are referring to is what they call STOLI (Stranger Owned Life Insurance). They use this term because the insured intends from the beginning to sell the policy in 2 year (after the contestability period). That is why they are only 2-3 year loans. So the first question to answer is why is it bad? or Is it bad and if so why?
Inherently the idea of using life insurance as an asset is not necessarily a bad idea. The issue arises when you borrow money to purchase life insurance that you don’t intend on keeping. I know some people bring up the whole attrition issue with life insurance companies, but that is really a misconception. Yes insurance companies have a number for lapsed policies they calculate each year and yes they do play a role in there pricing. But let’s think about it logically...how many 80 year olds buying 10mm policies with $250k premiums per year will let their policies lapse. These policies are typically bought for estate planning reason or business succession planning. The attraction is more centered around 25-30 y/o buying 20 year term policies. The real reason STOLI is bad is because there is a question about insurable interest when the policy is written. If the insured plans on selling the policy from day one then the insurable interest must lie with the person buying the policy (in most cases a large Hedge fund). If the insurable interest laws are violated then there is a chance that the government will remove the tax advantages of life insurance which no one wants. The other reason that STOLI can be bad is that it can eat up the insurance capacity of the insured which could be bad (this is also the issue with some life settlements).
There are NO carriers that knowingly accept STOLI business…let me repeat that there are NO carriers that approve of this business period. This brings us to the next problem. If the carriers don’t approve the program then they are either looking the other way (some where in the past but not now). I have not yet run across a carrier that does had a separate form just for premium financing cases. If that form is filled out honestly the carrier will not approve the app. IF the client lies on the form then it is considered fraud which does not have a contestability period.
Premium financing in its self in not bad. Life settlements in its self is not bad. Hybrid and traditional premium financing programs where there is little to no money out of pocket to the client are not in themselves bad. But if you can not tell the carrier what is going on then something is wrong. You should only work with programs that have been approved by the carrier. Just look at Ohio, who recently past a law saying that you can not sell you policy for 5 years. Already this program is illegal in the state of Ohio.
Also informal applications are used all the time and are in now way illegal. We pull APSs for our agents clients on a daily basis. And as for commissions $10,000 commission for a premium financed case is very very small. The target premium for premium financing starts at around $100k. As for the $78 contracting fee it sounds like a marketing ploy to add credibility to the program.
Sorry for the long post...
The program you are referring to is what they call STOLI (Stranger Owned Life Insurance). They use this term because the insured intends from the beginning to sell the policy in 2 year (after the contestability period). That is why they are only 2-3 year loans. So the first question to answer is why is it bad? or Is it bad and if so why?
Inherently the idea of using life insurance as an asset is not necessarily a bad idea. The issue arises when you borrow money to purchase life insurance that you don’t intend on keeping. I know some people bring up the whole attrition issue with life insurance companies, but that is really a misconception. Yes insurance companies have a number for lapsed policies they calculate each year and yes they do play a role in there pricing. But let’s think about it logically...how many 80 year olds buying 10mm policies with $250k premiums per year will let their policies lapse. These policies are typically bought for estate planning reason or business succession planning. The attraction is more centered around 25-30 y/o buying 20 year term policies. The real reason STOLI is bad is because there is a question about insurable interest when the policy is written. If the insured plans on selling the policy from day one then the insurable interest must lie with the person buying the policy (in most cases a large Hedge fund). If the insurable interest laws are violated then there is a chance that the government will remove the tax advantages of life insurance which no one wants. The other reason that STOLI can be bad is that it can eat up the insurance capacity of the insured which could be bad (this is also the issue with some life settlements).
There are NO carriers that knowingly accept STOLI business…let me repeat that there are NO carriers that approve of this business period. This brings us to the next problem. If the carriers don’t approve the program then they are either looking the other way (some where in the past but not now). I have not yet run across a carrier that does had a separate form just for premium financing cases. If that form is filled out honestly the carrier will not approve the app. IF the client lies on the form then it is considered fraud which does not have a contestability period.
Premium financing in its self in not bad. Life settlements in its self is not bad. Hybrid and traditional premium financing programs where there is little to no money out of pocket to the client are not in themselves bad. But if you can not tell the carrier what is going on then something is wrong. You should only work with programs that have been approved by the carrier. Just look at Ohio, who recently past a law saying that you can not sell you policy for 5 years. Already this program is illegal in the state of Ohio.
Also informal applications are used all the time and are in now way illegal. We pull APSs for our agents clients on a daily basis. And as for commissions $10,000 commission for a premium financed case is very very small. The target premium for premium financing starts at around $100k. As for the $78 contracting fee it sounds like a marketing ploy to add credibility to the program.
Sorry for the long post...
kingfish71
New Member
- 2
the cases i do are not with the intention to cash out in 2-3 years. these plans are for high net worth people who earn to much to participate in iras or sep iras. they are in the plans for 20-30 years, htey are in them to protect there bus from such things as lawsuits, and also to provide a tax free income at retirement. someone without large net worth are not going to participate in premium financed policies.your largest life insurance companies will assist you in these sales and also have their approved vendors for admiistration and financing.
- 2,088
first rule of thumb: stay away from "coference call recruiting"
Funny thread. As a National Director of a true premium financing company and formerly in charge of premium financing for a top 5 carrier I know a little about tradition, STOLI, IOLI etc. Funny how so many people talk about and misrepresent premium financing and give it a bad name. It is one of the most misunderstood and missold concepts out there. Of course after "vanishing premiums", 412i, section 79 and the list goes on.
Okay, so was that a spam post or what? I'm not certain whether any value was added. nor humor, which sometimes runs a close second to good information.
Are you agreeing with what was said? I'm not certain anyone actually said that Premium Financing was bad. What I know people have objected to is STOLI/IOLI and wet paper sales.
Are you agreeing with what was said? I'm not certain anyone actually said that Premium Financing was bad. What I know people have objected to is STOLI/IOLI and wet paper sales.
Spam? I am who I say and many people discuss STOLI/IOLI, 2 and flip, whatever they call it and unfortunately that is what "premium financing" has become know as. Traditional recourse premium financing is nothing like it. All of our clients are long term holds for estate planning can afford to "write the check" but choose not to. Why? Why should they when they can borrow the money from a third party? If they earn 10% in their business why not borrow funds at 6% to pay premium?
Also, someone mentioned targets earlier. In my experience targets average about $500k and some get well above seven figures.
Hope this adds value.
Also, someone mentioned targets earlier. In my experience targets average about $500k and some get well above seven figures.
Hope this adds value.
