Premium Financed Indexed Life Insurance Policies

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andy2012
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Premium Financed Indexed Life Insurance Policies

Post by andy2012 » Sat Aug 04, 2018 11:34 pm

Has anyone heard about these policies?

My insurance agent wants to sell a $10million premium financed insurance policy for which premium is financed by the bank. According to the payment illustration, a collateral of $250K is required which will be returned after 6 years. If policy will be active, a retirement benefit would be approximately $343K per year. In case of death, insurance will pay around $10mm. The insurance company is Pacific Life insurance and they do invest in S&P Index. Conservative growth is 6% per annum.

According to the agent, lots of doctors do take this kind of policy. Just wondering if anybody has any input. Happy to send illustration via link.

Thanks for help

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Dale_G
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Re: Premium Financed Indexed Life Insurance Policies

Post by Dale_G » Sun Aug 05, 2018 12:02 am

Yeah, I have heard of these policies.

But question #1: Do you have any need for 10 million dollars of life insurance? Or are you just being dazzled by a slick insurance salesman?

Dale
Volatility is my friend

SDLinguist
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Re: Premium Financed Indexed Life Insurance Policies

Post by SDLinguist » Sun Aug 05, 2018 1:08 am

My dad was dazzled by a sales guy a while back so I did a lot of research on them for him.

The basic idea is that you get a whole life policy with a very large payout and a very short payment term, usually a 7 pay which is the minimum number of years.

The premium in these instances can be close to a million dollars a year. (If you want 10 million in coverage and you only want to pay for 7 years the insurance company will definitely want a good chunk of those 10 million payed to them). So you find a bank to finance the premium payment.

The bank pays the premium and you pay the bank interest on the premium payment. Once the policy has accumulated a withdrawable cash value equal to the premium payments the bank has made that cash gets pulled out and the bank gets repaid. This is usually a couple of years after the payment term is over.

Then the policy is yours to do with as you want.

The collateral is needed to cover the shortfall between surrender value and outstanding premium payments that need to be payed back to the bank in case you are unable to pay the interest payments, pretty much defaulting on the loan.

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BL
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Re: Premium Financed Indexed Life Insurance Policies

Post by BL » Sun Aug 05, 2018 1:12 am

You can bet the agent would be tickled pink to get that commission!

Does someone depend on you for support for life? After your children are grown, you have retirement savings to cover you and your spouse, if any, do you still need insurance? Back in the days of low estate numbers, there was estate taxes to pay, but now not so many will be paying estate taxes.

"Buy term, invest the rest!"

andy2012
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Re: Premium Financed Indexed Life Insurance Policies

Post by andy2012 » Sun Aug 05, 2018 10:32 am

Dale_G wrote:
Sun Aug 05, 2018 12:02 am
Yeah, I have heard of these policies.

But question #1: Do you have any need for 10 million dollars of life insurance? Or are you just being dazzled by a slick insurance salesman?

Dale
I am looking for asset protection. My net Value has reached around 5-10mil. Any feedback on these kinds of policies?

andy2012
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Re: Premium Financed Indexed Life Insurance Policies

Post by andy2012 » Sun Aug 05, 2018 10:34 am

SDLinguist wrote:
Sun Aug 05, 2018 1:08 am
My dad was dazzled by a sales guy a while back so I did a lot of research on them for him.

The basic idea is that you get a whole life policy with a very large payout and a very short payment term, usually a 7 pay which is the minimum number of years.

The premium in these instances can be close to a million dollars a year. (If you want 10 million in coverage and you only want to pay for 7 years the insurance company will definitely want a good chunk of those 10 million payed to them). So you find a bank to finance the premium payment.

The bank pays the premium and you pay the bank interest on the premium payment. Once the policy has accumulated a withdrawable cash value equal to the premium payments the bank has made that cash gets pulled out and the bank gets repaid. This is usually a couple of years after the payment term is over.

Then the policy is yours to do with as you want.

The collateral is needed to cover the shortfall between surrender value and outstanding premium payments that need to be payed back to the bank in case you are unable to pay the interest payments, pretty much defaulting on the loan.
Yeah, I understand the concept. I think conceptually it would work. I was wondering if anyone has first hand experience and wanna share the details. I was thinking to start with 2-5million.

andy2012
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Re: Premium Financed Indexed Life Insurance Policies

Post by andy2012 » Sun Aug 05, 2018 10:35 am

BL wrote:
Sun Aug 05, 2018 1:12 am
You can bet the agent would be tickled pink to get that commission!

Does someone depend on you for support for life? After your children are grown, you have retirement savings to cover you and your spouse, if any, do you still need insurance? Back in the days of low estate numbers, there was estate taxes to pay, but now not so many will be paying estate taxes.

"Buy term, invest the rest!"
I already have a term from employer. Do you think buying additional term outside would help? Also, my family depends on me fully and trying to protect for them. any feedback will be appreciated.

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TomatoTomahto
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Re: Premium Financed Indexed Life Insurance Policies

Post by TomatoTomahto » Sun Aug 05, 2018 10:37 am

We are in your neighborhood of assets. I have not researched them. I also have not researched floating in shark infested waters with hamburger around my neck.
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Nate79
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Re: Premium Financed Indexed Life Insurance Policies

Post by Nate79 » Sun Aug 05, 2018 11:28 am

Always get term insurance if you can outside your employer if you have a need for insurance. I almost wonder if you have a need. With your assets are you sure your family could not live if you died?

I don't see any need for these very expensive fancy pants life insurance products. Mixing investing and insurance is a bad idea, even if you are moderately wealthy.

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Dale_G
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Re: Premium Financed Indexed Life Insurance Policies

Post by Dale_G » Sun Aug 05, 2018 11:36 am

Dupe - see below
Last edited by Dale_G on Sun Aug 05, 2018 11:43 am, edited 1 time in total.
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Dale_G
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Re: Premium Financed Indexed Life Insurance Policies

Post by Dale_G » Sun Aug 05, 2018 11:42 am

Andy, the first line of defense for asset protection is an adequate umbrella insurance policy.

Check your state law for asset protection provided by annuities. An umbrella + term insurance + cheap variable annuities may suit your need much more effectively and far cheaper than this very expensive "life insurance" product.

Another option is an umbrella + term + trust.
Dale
Volatility is my friend

andy2012
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Re: Premium Financed Indexed Life Insurance Policies

Post by andy2012 » Mon Aug 06, 2018 5:35 pm

Dale_G wrote:
Sun Aug 05, 2018 11:42 am
Andy, the first line of defense for asset protection is an adequate umbrella insurance policy.

Check your state law for asset protection provided by annuities. An umbrella + term insurance + cheap variable annuities may suit your need much more effectively and far cheaper than this very expensive "life insurance" product.

Another option is an umbrella + term + trust.
Dale
sounds great. Any company you would recommend for umbrella insurance?

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Dale_G
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Re: Premium Financed Indexed Life Insurance Policies

Post by Dale_G » Tue Aug 07, 2018 5:16 pm

There are exceptions, but generally umbrella insurance is sold in conjunction with auto/homeowners insurance. RLI is one company that sells umbrellas to folks who insure their property and autos at other companies.

The cost for a 1 million dollar policy could be in the range of $200-$400. The cost for additional coverage reduces the cost per million. Many companies limit coverage at 5 million.

In my opinion there is no need for the umbrella to equal or exceed your net worth. The umbrella insurance company kinda :D cares about defending a suit where their risk could be a million or so.

Dale
Volatility is my friend

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David Jay
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Re: Premium Financed Indexed Life Insurance Policies

Post by David Jay » Tue Aug 07, 2018 7:52 pm

andy2012 wrote:
Sat Aug 04, 2018 11:34 pm
My insurance agent wants to sell a $10million premium financed insurance policy...
I’LL BET HE DOES!
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

KT785
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Re: Premium Financed Indexed Life Insurance Policies

Post by KT785 » Tue Aug 07, 2018 11:01 pm

Dale_G wrote:
Tue Aug 07, 2018 5:16 pm
There are exceptions, but generally umbrella insurance is sold in conjunction with auto/homeowners insurance. RLI is one company that sells umbrellas to folks who insure their property and autos at other companies.
Like most, I have my umbrella policy with the same carrier that writes my home and auto coverage (State Farm in my instance). However, one benefit of RLI over many/most other carriers is that they provide the option of adding excess Uninsured/Underinsured Motorists coverage to the umbrella policy. From the quotes I've run (every situation is unique and YMMV) RLI tends to be a pricier option than going with the umbrella provided by my P&C carrier, with or without the excess UM/UIM coverage; nevertheless, it's worth evaluating.

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