Taking policy loans #6: How interest is charged
In this post I am going to talk to you about how interest is charged by the insurance company. Insurance companies work on an annual basis. illustrations are calculated annually, dividends are paid annually and loans are calculated on an annual basis. When you take a loan, you prepay interest for the remainder of the…
Taking policy loans #5: Writing off interest
Before I begin I want to let you know that the content of this post is in no way to be construed as legal or accounting advice. Please consult with your CPA before writing off any interest. Now that’s out of the way, let’s talk about writing off loan interest. If you are taking a policy…
Taking policy loans #4: Paying extra interest
Nelson Nash in the Becoming Your Own Banker book talks about repaying interest at a rate that is higher than what the insurance company is charging. He shows the additional interest going back into the policy, accelerating its growth. This is a source of confusion for many of my clients so I want to clarify.…
Taking policy loans #3: Repaying loans
In this post I am going to go into more depth on what you must consider when repaying a policy loan. First, I want to say that you should not take a policy loan unless you intend to repay it. You started your policy because you wanted to start controlling the banking equation and stop sending…
Taking policy loans #2: Why there is loan interest
In my last post I talked about how policy loans are taken from the insurance company and are collateralized by your policy’s cash value. Sometimes clients ask me why they have to pay interest when they are borrowing “their” money but as we have established we are not actually borrowing our own money. The health…
Taking policy loans #1: Where the money comes from
One of the most frequent questions I receive is about taking policy loans. This post is designed to help you better understand how policy loans work. First I want to start with an important distinction… When you take a policy loan, the loan is being borrowed from the insurance company, NOT your policy. Your full…