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Started By
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re: Whole Life, Infinite Banking (IBC), Cash Flow
Posted on 6/6/18 at 12:32 pm to IglooTiger
Posted on 6/6/18 at 12:32 pm to IglooTiger
Also, make sure that whatever policy you buy as from a mutual company, and has non-direct recognition of dividends... this is very important, but takes a while to explain. Someone earlier in the thread provided a link
This post was edited on 6/6/18 at 12:37 pm
2
Posted on 6/6/18 at 12:43 pm to IglooTiger
How is your health?
Which company are you looking at?
How is the policy being structured?
Why 15 years?
Which company are you looking at?
How is the policy being structured?
Why 15 years?
Posted on 6/6/18 at 1:26 pm to jrobic4
quote:
but takes a while to explain.
No it doesn't.
quote:
non-direct recognition of dividend
Just means the policy's dividend rate is unaffected by taking a loan.
quote:
make sure that whatever policy you buy as from a mutual company, and has non-direct recognition of dividends
This isn't a blanket statement. The devil is in the details of the contract and what rates/guarantees OP qualifies for
These are attractive features that are a plus, not something to eliminate providers
This post was edited on 6/6/18 at 1:27 pm
Posted on 6/6/18 at 4:37 pm to GenesChin
Not to get into a pissing contest, but you're only half right on the dividend recognition on non direct recognition policies. Not only does the interest rate stay the same, but it credits the policy based on the high-water mark of the cash value. This does not mean that dividends cannot rise or fall if the dividend paid as a whole changes.
Every Bank on yourself system that I am aware of recommend Mutual policies because of the dividends they pay
Every Bank on yourself system that I am aware of recommend Mutual policies because of the dividends they pay
This post was edited on 6/7/18 at 7:43 pm
Posted on 6/6/18 at 4:42 pm to jrobic4
Posted on 6/6/18 at 5:50 pm to meansonny
quote:
The cash value life insurance won't continue to grow with the loan. It is cheap access to funds. But funds borrowed wont continue to accrue interest with outstanding loans. If some is offering that, don't believe them until they can show you a policy jacket with it in writing. Cash which hasn't been borrowed against will not be suspended from growth. And future payments into the life insurance will continue to further the cash value. But you won't be permitted the low cost loan with growing interest on top of it.
The loan technically comes from the mutual insurance company, not the policy.
This post was edited on 6/6/18 at 5:55 pm
Posted on 6/6/18 at 5:51 pm to jrobic4
(no message)
This post was edited on 6/6/18 at 5:59 pm
Posted on 6/6/18 at 5:53 pm to BigErn
quote:This... you need to make sure you qualify for all this.
How is your health? Which company are you looking at? How is the policy being structured? Why 15 years?
This post was edited on 6/6/18 at 5:56 pm
Posted on 6/6/18 at 5:57 pm to BogeyGolf
quote:Good health
This... you need to make sure you qualify for all this.
Posted on 6/6/18 at 6:01 pm to jrobic4
Thanks for the feedback. It is a mutual company, I'll check on non-direct recognition of dividends.
Posted on 6/6/18 at 7:42 pm to IglooTiger
Look at IUL or VUL with a capped variable rate loan. There are some attractive arbitrage possibilities long-term.
Posted on 6/6/18 at 9:16 pm to iknowmorethanyou
Vul can bea good product, but you want to talk about the devil being in the details! In my opinion, not appropriate for OP needs. What if he needs to access cash during a downturn? That's when attractive buying are to be had, but if the value of the portfolio is down there is less cash available.
Iul is just another way that companies are trying to repackage Universal Life as a product that serves all of the consumers wants and needs with no downside. Problem is there is no such thing.
Iul is just another way that companies are trying to repackage Universal Life as a product that serves all of the consumers wants and needs with no downside. Problem is there is no such thing.
Posted on 6/6/18 at 10:31 pm to jrobic4
Every company's UL is built differently.
I've seen 3.5% interest rates outperform 6% rates because of the internal fee structures. Always review the illustrations. Confirm if the illustration is showing a guaranty, a current (snapshot of how the policy is performing today) illustration, or some hypothetical situation put together by the sales rep (avoid these). There are internal costs to the insurance policies which vary from product to product (vUL often has more maintenance cost than a iUL has more cost than a standard UL has a cost more than a WL. Companies paying 6% will often have higher costs than a 3.5%. The illustrations are your key to hidden costs as they presently do not have good disclosures provided for how your premiums get applied.
Back to cost of insurance (mortality)... whole life and universal life equally have a cost of insurance. Whole life takes that cost and spreads the cost out evenly during the course of the policy. Universal life charges for 1 year of insurance (i.e. the lowest cost available). This is one way the universal is often superior to whole life because it front loads your cash value. But at every birthday that cost will continue to increase. And when you are mid 70s, the cost is extremely high as you are at the average mortality age. This is why borrowing all of your cash value can jeopardize the permanency of UL policies.
Again... the UL and whole life have the same costs of insurance, but the whole life levels out the cost so you are effectively prepaying in the older ages as soon as the policy starts.
I've seen 3.5% interest rates outperform 6% rates because of the internal fee structures. Always review the illustrations. Confirm if the illustration is showing a guaranty, a current (snapshot of how the policy is performing today) illustration, or some hypothetical situation put together by the sales rep (avoid these). There are internal costs to the insurance policies which vary from product to product (vUL often has more maintenance cost than a iUL has more cost than a standard UL has a cost more than a WL. Companies paying 6% will often have higher costs than a 3.5%. The illustrations are your key to hidden costs as they presently do not have good disclosures provided for how your premiums get applied.
Back to cost of insurance (mortality)... whole life and universal life equally have a cost of insurance. Whole life takes that cost and spreads the cost out evenly during the course of the policy. Universal life charges for 1 year of insurance (i.e. the lowest cost available). This is one way the universal is often superior to whole life because it front loads your cash value. But at every birthday that cost will continue to increase. And when you are mid 70s, the cost is extremely high as you are at the average mortality age. This is why borrowing all of your cash value can jeopardize the permanency of UL policies.
Again... the UL and whole life have the same costs of insurance, but the whole life levels out the cost so you are effectively prepaying in the older ages as soon as the policy starts.
Posted on 6/6/18 at 11:15 pm to jrobic4
quote:
Not to get into a pissing contest, but you're only half right on the dividend recognition on non direct recognition policies.
I'd recommend against it, I'm a life insurance actuary
This post was edited on 6/6/18 at 11:33 pm
Posted on 6/6/18 at 11:26 pm to meansonny
quote:
the UL and whole life have the same costs of insurance
This is not even remotely close to being true.
This post was edited on 6/6/18 at 11:31 pm
Posted on 6/7/18 at 1:18 pm to meansonny
AG49 has pretty much homogenized illustrations to remove "sales rep tinkering". It also waters down loan illustrations by putting a governor on the arbitrage potential.
Posted on 6/7/18 at 6:30 pm to GenesChin
quote:
This is not even remotely close to being true.
For cost of life insurance? It would be pretty ignorant of a company to use two different mortality tables.
If it is 2 different companies (2 different products could have 2 sources developing the product ), then I understand. But the same company shouldn't dispute itself with 2 different mortality tables.
Posted on 6/7/18 at 8:07 pm to GenesChin
As an actuary, I'm certain that you know more about the design of insurance policies than I do. However, please help me understand how my statement was wrong. Sincerely, I would like two understand that these products better:
Interest rate the same regardless of whether there's a loan oustanding or not (total agreement)... doesn't mean the company cannot change their dividend scale (agree on this as well I assume?)
While I would agree that a well-run stock company is a better option than a poorly-run mutual one, I can't see any reason I wouldn't buy a policy from one of the best mutual companies if all underwritings factors or equal.
If I was never going to take money from my policy, I would probably choose a direct recognition company. For this guys need, where he plans to cash flow from the policy, I don't see why it would even be a contest between direct and non direct recognition.
Once again, I'd really like to understand the internal structure of these things better. Any help is appreciated
Interest rate the same regardless of whether there's a loan oustanding or not (total agreement)... doesn't mean the company cannot change their dividend scale (agree on this as well I assume?)
While I would agree that a well-run stock company is a better option than a poorly-run mutual one, I can't see any reason I wouldn't buy a policy from one of the best mutual companies if all underwritings factors or equal.
If I was never going to take money from my policy, I would probably choose a direct recognition company. For this guys need, where he plans to cash flow from the policy, I don't see why it would even be a contest between direct and non direct recognition.
Once again, I'd really like to understand the internal structure of these things better. Any help is appreciated
Posted on 6/7/18 at 10:19 pm to GenesChin
Genes, just to clarify, what are you arguing for or against?
This post was edited on 6/7/18 at 10:23 pm
Posted on 6/8/18 at 8:28 am to meansonny
quote:
For cost of life insurance? It would be pretty ignorant of a company to use two different mortality tables.
First, WL has fixed COI charges guaranteed in the contract while UL has a current rate that is variable that is only capped by contract guaranteed
To your point, mortality assumptions do vary from UL to WL contracts because demographics of people who buy then are different.
Now, some companies may use identical assumptions, but more sophisticated pricing operations will often have variations in selection factors
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