Policy Analysis and Review (PAR) is a fundamental process of our training. Without question reps in the insurance industry should be reviewing their clients policies on a regular basis. This also includes reviewing the policies that you did not sell them. In most cases you will be able to provide three possible outcomes:
- They will be able to get a new policy with the same benefit for less money.
- They will be able to get a new policy with the same premium but more benefits and guarantees.
- You will let them know they have the right policy and should stay right where they are.
But what happens when you run into a policy that has a big loan attached to it? Most of the reps we deal with see this as a no-win scenario. But that does not have to be true. There are several carriers that will take a 1035 exchange that includes an existing loan. Here is an example of how that would work.
How to Rescue a Client from a Policy Loan
| CASE STUDY |
| Situation |
| Paul has an outstanding loan of $126,048 with a 6% loan interest rate on his whole life policy. He’d like to stop paying premiums, but Jeff and his advisor are concerned when they review the in force illustration. If Jeff decides not to pay any future premiums, loan repayments, or loan interest, the cash value and death benefit are reduced at a rapid pace. Even worse, the policy is projected to lapse at age 85 leaving Jeff with no cash value, insurance, and a tax bill for the gain. |
| Facts |
|
| Solution |
Paul does a 1035 and transfers the existing policy’s cash value and loan to a new insurance company. In year 2, he takes a withdrawal to repay the loan balance and completely pays off the loan. Without paying any additional premiums, Jeff is left with a death benefit of $500,000 that is projected to last to age 101. This is possible for two reasons:
Policy Analysis and Review (PAR) is a great tool for our advisors. Now we have a solution to rescue those policies that have loans on them. Give us a call and we can help you. |
My "Bersonal" View 