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09-08-2004, 04:02 AM
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#1 |
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Registered User
Join Date: Sep 2004
Posts: 3
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Loans Against Life Insurance
Twice, during a financial hardship, I borrowed money against life insurance policies (one is a whole life, the other is a universal life policy). Apart from the impact on my death benefit, is there any reason to pay those loans back?
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09-09-2004, 01:15 PM
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#2 |
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Registered User
Join Date: Mar 2004
Location: New York
Posts: 1,351
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Insurance loans
The reduction of death benefit is the biggest impact.
Be wary of letting the policies lapse though. If you borrowed above your cost basis (premiums paid), the loans will become normal income and will taxed as such. If your policies are performing well enough to absorb the interest due and still keep your policy in force, there is really no reason to pay them back...that's what they're there for. However, if they are being eroded by the interest, there is a strong chance you will receive an additonal premium due notice to keep them in force, thus leaving you with the dillemma to surrender or pay up. If it's not a burden and you are still able to save for retirement, you can pay them back on your own schedule. Keep in mind that you are essentially paying yourself back. |
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03-27-2007, 11:06 AM
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#3 |
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Registered User
Join Date: Mar 2007
Posts: 1
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Borrowing against term life
Is there a way to borrow money on a term life insurance policy during times of hardship?
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03-27-2007, 11:21 AM
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#4 |
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Harold Hecuba Productions
Join Date: Sep 2004
Location: New Berlin, Illinois
Posts: 934
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Term life has no cash value, hence no money to borrow...
__________________
jb IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication (or in any attachment). |
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03-28-2007, 05:02 PM
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#5 |
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Registered User
Join Date: Sep 2005
Posts: 74
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I recently had a solitication from a vendor stating how loans may be taken from a ROP policy. In all fairness, I really didn't pay too close attention to his presentation and can't give any real advice or merit to his claim.
I know that ROP polices have value before the maturity date. Other professional may be able to elaborate on this. sturgbe |
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03-30-2007, 09:18 PM
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#6 |
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Registered User
Join Date: Jul 2006
Location: somewhere in texas
Posts: 1,455
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term ROP is a marketing scheme for all the companies who have spent all their money trying to tell people that whole life sucks and is a rip-off. hence, they have now come up with term ROP which is temporary whole life insurance. you truly gotta be amazed at what people will swallow.
1MO |
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04-19-2007, 12:13 AM
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#7 |
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Registered User
Join Date: Feb 2007
Posts: 8
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ROP Term Life Insurance
Return of Premium life insurance might be a good choice for those who feel that they need somewhat cheap temporary life insurance coverage and would profit from the forced savings component. Here is a good overview article on the pros and cons of Return of Premium Term Life Insurance that can hopefully show both sides of the story.
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04-19-2007, 08:00 AM
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#8 |
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Registered User
Join Date: Jul 2006
Location: somewhere in texas
Posts: 1,455
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jrt, i read the article and have to reiterate: you gotta be amazed at what some people will swallow!
__________________
1MO disclaimer: "you didn't give me enough information to answer your question, so my answer might not be appropriate for you. in any case, don't take advice from me or anyone else on this board. it's not our life. it's not our money. you don't know who we are." "also, i am very arrogant. if your feelings were hurt in this message you probably need to get some thicker skin." buy cheap term: www.i'm_a_dufus_for_clicking_here.com |
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04-19-2007, 03:28 PM
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#9 |
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Registered User
Join Date: Feb 2007
Posts: 8
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Return of Premium Life
Better than ROP term: buy cheap regular term life and set up an automatic investment monthly into some other type of tax advantaged account (IRA, qualified plan, Education Savings account, etc.)
ROP term just makes it simpler for those who would not be disciplined enough to set up a sound investing strategy but yes, insurance should never be thought of as an investing strategy - especially when one has not maxed out the many other alternatives that are much better suited for achieving their investing goals. |
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04-20-2007, 12:22 AM
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#10 |
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Registered User
Join Date: Apr 2006
Posts: 143
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Once again ROP is a ripoff, BAD BAD BAD for the client
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04-20-2007, 01:47 PM
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#11 |
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Registered User
Join Date: Sep 2005
Posts: 74
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cp123,
What is your basis for that bold statement? I assume this is just your opinion because you have no hard facts to back up what you post. |
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04-20-2007, 06:15 PM
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#12 |
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Registered User
Join Date: Jul 2006
Location: somewhere in texas
Posts: 1,455
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sturgbe, i know you didnt ask me ... but that never stopped me before.
first, if we want to be honest, there is only one kind of insurance. there is term. period. ipso facto completo. that said, there is term that lasts for a short term (5/10/30/30 years) and there is L-O-N-G term that lasts till life expectancy (or in reality well beyond). the short term stuff is the lowest initial cost and the largest long term cost. the long term stuff is the highest initial cost but a negative long term cost (meaning you get back MORE than you put in, usually considerably more). so, what is ROP. ROP is an inbetween of long term and short term. it wont last as long as the long term stuff but it costs a lot more than the short term. remember, this is a marketing gimmick. all these so called "experts" touted TERM as the only answer in every case for each person. well, in the end they couldnt sell "long term term" (aka Whole Life). this created a public relations nightmare when companies cancelled their insurance or allowed it to renew for 20 times the cost they were originally paying. so, they "invented" term ROP as a stop gap. if you do NOT believe in whole life, then you CANT believe in term ROP. if you do NOT believe in temporary insurance for long term coverage, you CANT believe in ROP. if you do believe in buying term and investing the difference (which is folly) then you CANT belive in ROP. if you believe in insurance that pays you back for your premiums paid, ROP is inferior in the extreme. so, sturgbe, where is it that ROP fits in? it is a BAD BAD BAD choice for the client.
__________________
1MO disclaimer: "you didn't give me enough information to answer your question, so my answer might not be appropriate for you. in any case, don't take advice from me or anyone else on this board. it's not our life. it's not our money. you don't know who we are." "also, i am very arrogant. if your feelings were hurt in this message you probably need to get some thicker skin." buy cheap term: www.i'm_a_dufus_for_clicking_here.com |
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04-20-2007, 08:06 PM
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#13 |
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Registered User
Join Date: Sep 2005
Posts: 74
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OK????
First, I do believe in permanent insurance. And I aso believe in temp. term insurance. I do not (fully) believe in BTID. I believe in covering the need first. If you can accomplish that with perm insurance from a cost standpoint...then great. "if you believe in insurance that pays you back for your premiums paid, ROP is inferior in the extreme." Please explain what you mean by that. This has to be opinion because, again, there is absolutely no fact in what you say. Inferior how? ROP fits into my financial plan. I own straight term, permanent and ROP insurance. I will receive approximately 7% ROR at the end of my ROP term. To me, it makes perfect sense. The extra money spent over straight term was very insignificant and knowing I was going to have a guarnteed 7% forced savings plan made it even better. I also weighed the options I have at the end of my ROP policy should I need the coverage. I do not beleive in 15 or 20 year ROP plans due to the lack of ROI. And if there is a rating, ROP is not reccommended. I feel that you have greater liquidity and just as good or better chance to achieve the end result with straight term and a side fund. ROP has benefits beyond receiving your premiums back. Please post what your options are at the end of your term with ROP... because you failed to recognize the benefits earlier. If you do not feel that the extra premium is worth it...buy straight term. If you find value with ROP, buy it. Each case will be different based on age/face and rate. Sometimes it does not make sense and is a bad deal for the client. Conclusion: ROP fits in when it fits in with the clients objectives and needs. |
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04-21-2007, 10:21 AM
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#14 |
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Registered User
Join Date: Jul 2006
Location: somewhere in texas
Posts: 1,455
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sturgbe, please show me how this statement is true: "I will receive approximately 7% ROR at the end of my ROP term."
it would seem to me that if i paid in 25,000 in premiums over a 20 year period and then at the end i received my Return of Premium of $25,000 then i would have received absolutely NO rate of return. also, i see term ROP "marketed" all the time in that it has "tax deferred" growth. what bunk! if there is no growth, then how can it be tax deferred. or, i love this ... sturgbe, you KNOW this is a gimmick: "With Term ROP you get all of your premiums at the end of the period INCOME TAX FREE." oh gosh! excuse me, arent we talking about "basis" here? and when basis is level, it is ALWAYS income tax free. these are a couple of EXAMPLES where people are being DECEIVED as to the value of a financial product. if you have to slick talk someone to get them to buy something, then might i suggest that you are selling an inferior and gimmicky product. and if THAT is true, then... Term ROP is BAD BAD BAD for clients.
__________________
1MO disclaimer: "you didn't give me enough information to answer your question, so my answer might not be appropriate for you. in any case, don't take advice from me or anyone else on this board. it's not our life. it's not our money. you don't know who we are." "also, i am very arrogant. if your feelings were hurt in this message you probably need to get some thicker skin." buy cheap term: www.i'm_a_dufus_for_clicking_here.com Last edited by 1_more_opai : 04-21-2007 at 10:24 AM. |
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04-21-2007, 12:15 PM
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#15 |
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Registered User
Join Date: Feb 2007
Posts: 149
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Actually, if you ONLY receive your premiums back, the ROR isn't zero, it's actually negative. Think about it, if you invested it at ANY interest rate you would have more than what you started with. I'm assuming Sturgbe realizes this and isn't talking about straight ROR on ROP.
ROP is simply a clever way for insurance companies to borrow money interest free to invest. -Joe
__________________
For God so loved the world that He gave His only begotten Son, that whosoever believeth on Him should not perish but have everlasting life. (John 3:16) For all have sinned and come short of the glory of God. The wages of sin is death, but the gift of God is eternal life through Jesus Christ, our Lord. (Romans 3&6:23) Whosoever shall call upon the name of the Lord shall be saved. (Romans 10:13) |
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