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Episode 32: How do Bank on Yourself Policy Loans Work?
In this episode, we ask: What is a life insurance policy loan? If I’m trying to be debt free, why go back into debt with an insurance company? Are life insurance loans just like a credit card or a mortgage? Isn’t a life insurance loan just like a personal loan? How does your cash value collateral continuing growing, even when you have a policy loan outstanding? How is this different from a HELOC? Is your house guaranteed to go up in value? What about contractual guarantees with a life insurance policy loan? What are the limits with a life insurance policy loan? Could the loans lapse the policy? What is the best kind of investment to a life insurance company? Can you be “underwater” in your life insurance policy loan? What are the requirements for this type of life insurance policy to work in a Bank on Yourself design? Is it whole life insurance? Is it a non-direct recognition loan? Is it flexible, so you keep it for your entire life? Are you repaying your loans? Are you working with a knowledgeable, authorized advisor? Do you have trauma from a previous bad experience? Why do so many advisors not know how to design these properly? Does your existing whole life insurance policy penalize you when you take policy loans? Does your advisor know what they’re doing? Do they frantically google in front of you? Why did the Titanic sink? Do you know an advisor who has a skillful knowledge of Life Insurance contracts? Of what red flags should you be aware? With non-direct recognition policy loan, how is the dividend credited on a whole life policy? If you don’t have a non-direct recognition policy loan, what happens? When you take a policy loan, where does the money come from? See The Bank On Yourself Revolution by Pamela Yellen, page 256 What is the collateral for that loan? When do life insurance companies get a profit? How do you benefit from the interest you paid on the loan? If the insurance company’s yield is better than their worst case scenario, what happens to your dividends? Who’s allergic to paying interest? What are some financing strategies when buying a car? What interest does an insurance company charge on the loan? Who are the owners of the insurance company? Do you love that you are charged loan interest? What is simple interest, compounded annually in arrears? When is 5% not always 5%? Why would you willingly pay extra for something? What type of interest would you like on a savings account? Simple? Compound? How can you calculate the growth you receive? Is the method of banking on yourself better or worse than paying cash for things? Don’t you wish more people knew about this? How can you make a profit on buying a car? How can you use a life insurance policy with non-direct recognition policy loans for income in retirement? What’s the problem with the direct recognition policy loan design for income in retirement? What design features have a tremendous amount of impact on how long money will last in retirement? How do banks use money in more ways than one (at the same time)? What does the fine print in your contract say? “Ignore what banks tell you to do with money, and instead, watch what they do with their own money.” – John McCarthy How much money do banks keep in life insurance contracts? What’s a tier 1 asset? How can you change your family tree?
13 Apr 2018