Question about payment grace period.....

[Deepsea]

I used to be an agent for 3 years. I failed out and my biggest customer was myself.
I got divorced....yada.......yada.......

Anyway my question if someone can answer :

There is a 31 day grace period to pay a life insurance premium, but the insurance company won’t automatically borrow from the policy to pay premium due from the cash value until the 62nd day (assuming the automatic premium loan option). My question is if I borrow from one policy to pay the premium for another policy........the loan interest clock starts right away from the policy that I borrow from, but since I have a 31 day grace period then for example I can request the loan to pay the policy on the 25th day and it’s like getting almost a month interest free. Is that correct ?

Also my other question is : Can I do that after the 31 day grace period also ?
I assume the insurance company wouldn’t let me do that and any loan from one policy to pay another after the 31 day grace period would accrue interest for how many total days the premium wasn’t paid.

So if I borrow from one policy 45 days after the premium was due on another policy, then I would owe not only the interest from the policy that I borrow from at the point in time the loan was made, but ALSO 45 days interest on the policy that the premium was paid 45 days late.

Does the above make sense ?

 

[WinoBlues]

I don't know.

Unless this is a Large premium loan it seems to me you are spending to much time and risk ( no coverage) to try and game the system for a few dollars. IMohsoHO

Pay the premium or pay the interest.

 

[Deepsea]

Just looking for 31 day vs 62 day question if anyone knows the answer.

Not looking for “just pay”.

I’m looking for feedback if someone knows how this actually is handled.

Thanks !

 

[Deepsea]

And yes a large premium loan.....but still

 

[Allen Trent]

also, many times you have no coverage during those days 32-60. Some carriers have, in addition to the 30 day grace period, another 30 day late payment offer to be able to keep the policy without being re-underwritten. but if you die during days 31-60, no coverage. If you have a quarterly premium, it will mean you are paying in the end for 12 months of coverage but really only covered during 8 months a year.

Better to not mess around with this. If you don't want to pay the full premium & it is a WL policy, change the dividend option to reduce premium or change it to Alternate premium payment option which has the dividend pay toward premium & then takes PUAR values to cover the rest. Add the Automatic Premium loan if it is not already on the policy. Lastly, if you don't like these other 1st 2 options, quit screwing around with it & elect the non-forfeiture option of Reduced Paid Up. then you are done with premium but still have reduced paid up policy that will always be there & possibly grow if dividends by more PUAR coverage

 

[Deepsea]

1) it’s a large premium

2) I figure I can save about $300 in interest if let say I.....

3) Take a loan from another policy to pay the premium on the policy where the premium is due.

For a policy with a premium due on October 1......
Can I borrow from another policy I own to either :

1) Pay the policy within 31 days so say pay the policy on October 27th

Or better yet

2) Pay the policy with a policy loan on November 20th, for a premium due on October 1. Which would give me in essence an interest free loan for 50 days. While of course the clock would start on the interest on the policy I would take the loan on right away.
However I would be credited by the company as paying the policy due on October 1, even though I wouldn’t pay until November 20th.

 

[DHK]

A large premium and you're trying to save a few pennies (in comparison) by timing your payments?

Let me guess... you also do a lot of balance transfer games on your credit cards? Sure, it may record the balance transfer as a 'payment', but looking at the cash flow and net-worth balances, you're not paying anything down.

Sure, you can play "cash-flow whack-a-hole", but you're not solving the problem - just playing the shell payment game. Short-term may buy you some time. Long-term... it'll collapse under the costs of insurance and compounding loan interest charges.

I wouldn't assume that you'd have any kind of "interest-free loan" out of a policy. Life insurance loans don't work like that. They begin to charge interest the DAY you take them out. Your "grace period" for payments is to keep the policy in-force, NOT like a credit card "grace period" before interest begins to accrue on an unpaid balance. Similar terms, but completely different applications.

Life Insurance Loans, In advance or Arrears? | Truth Concepts

 

[Deepsea]

I don’t carry credit card balances.

Look when people pay a premium monthly the insurance company charges around 10% APR.

If I was going to pay a premium of say $50,000, would it be so horrible to either pay 10 days before the 31 day grace period, or even better 45 days after the original premium date but before the 62nd day which would trigger the automatic premium loan..

So pay paying the premium this way I just saved $307.50
Enough for 3 nice dinners for a couple of 2

 

[Deepsea]

also, many times you have no coverage during those days 32-60. Some carriers have, in addition to the 30 day grace period, another 30 day late payment offer to be able to keep the policy without being re-underwritten. but if you die during days 31-60, no coverage. If you have a quarterly premium, it will mean you are paying in the end for 12 months of coverage but really only covered during 8 months a year.


So here is my question in a nut shell.

Annual premium payments *****
Automatic Premium Loan Option*******
Enough CV in policy to cover the policy premium from an internal policy loan***

The whole purpose of automatic premium loan is to not lapse coverage****
So I am sure I would have coverage.

Question is does that 31 day grace period for all intents and purposes in fact become a 61 DAY GRACE PERIOD.

What’s the answer ?
It seems that it would.

Thanks !

 

[Allen Trent]

Look when people pay a premium monthly the insurance company charges around 10% APR.

I have seen that with quarterly, but the carrier I represent charges EFT at exactly 1/12 of annual