"Let’s say I take out a $1mil life insurance policy and make my payments for a few years. Can I borrow $1mil from a bank and use my Life Insurance policy as collateral? "
If you buy a 1mil UL life policy and fund it to the maximum amount you can accumalate a pretty substantial amount of cash value in a few years.Any funding over the cost of insurance goes sraight into the cash value and most policies are currently earning about 4.5% on the cash value.
You can access cash several ways at this point-
1- you can borrow your own money(the cash value) typically at a 4.5% interest rate, the neat thing here is that the borrowed funds still earn 2.5% interest for a net cost loan of 2%.
2- you can take an ACCELERATED DEATH BENEFIT. The insuring company will offer this to you if you are diagnosed with a terminal illness. the ADB will be a dollar for dollar exchange in this instance. There are third party companies that will also buy your death benefits and advance you money before you die. You would name them as a beneficiary and there is a cost involved, in otherwords no dollar for dollar exchange.
As far as using life insurance or cash value in a life policy as collateral for a loan from a traditional lending institution, you’d need to talk to a banker but I can’t imagine any traditional lenders doing this. In most states there are several types of assets that are immune to civil action or collection proceedings, cash value in a life insurance policy is usally a protected asset, if they can’t sue you for it it’s not very good collateral.
There are companies out there that will pay you a certain amount of money NOW and your life insurance policy is paid to them when you die.
He took the bait like a jugbelly redfish on an olive and white clouser.
Fritz is right.
I’m a Certified Financial Planner (CFP), and there are a couple of ways this happens.
First is a concept called “Investor Owned Life Insurance” or “Stranger Owned Life Insurance”. Basically, what happens is you apply for a life insurance policy on your life with the sole intention of selling that policy to an investor, or group of investors. They will buy it from you for some percentage of the face amount (death benefit), based on factors including your age, health, and an assumed rate of return. They pay you for the policy, then pay the premiums on it until you die and then collect the death benefit. For example, if you owned bought a $1,000,000 policy at age 45, while in good health, and then sold it to investors, you might be able to get $200,000 today for that policy, (don’t hold me to that number, it’s simply an educated guess).
The second method is for policies that you purchased sometime in the past, and NOT for the sole purpose of selling them to outside investors. You still can sell them to specialized companys that will buy your life insurance. These are called “Viaticals” or “Life Settlements”, and people use them when they no longer have a need for the life insurance they previously purchased. In many cases, you can sell these older plans for more than the cash surrender value you would receive from the insurance company if you cashed them in.
In my opinion, although I can imagine situations where “Viaticals” or “Life Settlements” might be of value to a consumer, both of these methods open up the floodga
“Furthermore, most reputable insurance companies will not issue a policy if they know it’s for the sole purpose of selling to investors”
That would be 100% correct. At the time of application the beneficiary designation has to “make sense” whether it’s personal or business life insurance. Life insurance companies will not issue a policy just because you can pay the premium. However, once the policy is issued, the owner of the policy can change the beneficiary to who or whatever they wish as long as your original intent to purchase was not misrepresented.
"In my opinion, although I can imagine situations where “Viaticals” or “Life Settlements” might be of value to a consumer, both of these methods open up the floodgates for frauds and scam artists. "
You guys are wrong. Any life insurance company would sell you a life insurance policy with no questions. Only, they don’t call it a life insurance policy. They call it an “Annuity”!
I’ve never heard a heard a financial advisor claim that they are a good idea. Most of them agree that they are a huge waste of money as there are 10,000 other ways that you can make a better return.
“You guys are wrong. Any life insurance company would sell you a life insurance policy with no questions.”
Okay, if you say so. LOL
“Only, they don’t call it a life insurance policy. They call it an “Annuity”!”
Ummm, those are not the same thing. Both have some features that are similar such as a payable death benefit but their function and use are totally different. A life insurance policy will provide an income stream to your survivior(s) in the event of your death, an annuity will provide an income stream to you if you annuitize it. If you die the account value of the annuity is payable to your beneficiary, same as the account value of a checking or savings account.
BTW, my bank keeps telling me that there is a difference between my checking account and my savings account, but for some reason the money still spends the same way!
Greg, I know what you want. I’m just making fun of the insurance salesmen for a minute. Greg, the thing to do is take out any kind of unsecured loan you want and just don’t pay it! Sure, it will hurt your credit, but if you can party your balls off and are gonna die one day anyway, then just remember…
HEAVEN – Doesn’t look at your credit score and they don’t take American Express… VISA… It’s everywhere!
And greg, yes, you are looking for a return even if you don’t call it that. If I charge up a lot of money on a credit card and party my balls off, then default on the card, then I just got a hell of a ROI!!!
Greg, I know what you want. I’m just making fun of the insurance salesmen for a minute. Greg, the thing to do is take out any kind of unsecured loan you want and just don’t pay it! Sure, it will hurt your credit, but if you can party your balls off and are gonna die one day anyway, then just remember…
Yeah…but debt doesn’t die with you. I want to everything to be clear when I kick it.
“Greg, the thing to do is take out any kind of unsecured loan you want and just don’t pay it! Sure, it will hurt your credit, but if you can party your balls off and are gonna die one day …”
Yup, that’s what I’d advise also.Do it that way and pray for an early death.LOL Screw the rest of 'em.
See you guys Monday, we gonna kill some deer this weekend, spend the night at the club,eat, drink…
quote:Originally posted by skinneejYou guys are wrong. Any life insurance company would sell you a life insurance policy with no questions. Only, they don't call it a life insurance policy. They call it an "Annuity"!
I’ve never heard a heard a financial advisor claim that they are a good idea. Most of them agree that they are a huge waste of money as there are 10,000 other ways that you can make a better return.
</font id=“quote”></blockquote id=“quote”>
quote:Originally posted by skinneej
Greg, I know what you want. I'm just making fun of the insurance salesmen for a minute.
Skinneej,
I’ve read many of your posts, and you come across as an informed and intelligent investor, so it surprises me that you seem to have taken a big swig of the “Money Magazine”(and others) cool-aid regarding annuities, and perhaps don’t really understand them like you think you do. I think that I’ll give you the benefit of the doubt and assume you are just trying to get a rise. I am not an insurance salesman, (although I’m happy to help my clients do planning in that area), so I’ll even let that comment slide…this is the internet after all, and slams here are nothing new.
I know that people think that annuities exist for agents to make money, but if you ever bothered to research them for yourself, rather than depending on publications who receive the vast majority of their advertising dollars from mutual fund companies, you might find that there actually exists a true need for annuities. Are they right for everybody? No. Are they right for some people? Yes. Do agents make more money by selling them? Yes, but only initially. If you get paid by assets un
Dragonslayer, you are correct. To be honest, I really don’t know much about them and that is why I added in the opinion of others (instead of my own). It’s definitely a topic that I want to educate myself on later, but my limited understanding is that they barely keep up with inflation and there are a plethora of investment vehicles that are better. Also, you mention “guarantee”, but I don’t think that all annuities are guaranteed. It’s my understanding that the ones sold by insurance companies usually have some kind of backing which may vary from state to state, but not for the ones sold by banks, etc.
And yes, I was just trying to get a rise.
What interest rates are you seeing on annuities right now?
