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An Unfortunate Conversation Regarding a Life Insurance Policy Loan

February 12th, 2020 No comments

What your client doesn’t know certainly can hurt him

Life insurance policy loans trip up more people than I thought could ever be possible.  It’s not because they’re so complicated but because they aren’t properly explained to most policy owners.  Worse yet, many policy owners don’t even know they have loans on a policy and when they do, don’t understand how they got there.  This sounds so ridiculous it defies belief.

Consider this: A policy owner recently called me after his attorney sent him a copy of something I’d written about policy loans.  “This story could be about me.” he exclaimed.  I asked him to send me what he had and explain what he was trying to accomplish.  Included was a list of questions he had for his agent, of which the agent answered the simple and inconsequential ones and ignored the balance.  It was easy to understand why, as the balance of the questions had no answer that any agent would want to share with a client.

Here was one of the questions: “When I first talked to you years ago, you indicated that I could borrow my own funds at a 1% to 1 1/2% interest rate, so how did the loan get to over $700,000 when I only borrowed about $175,000 and paid back $225,000 at one point.”  I imagine that would be a good question.

It’s fortunate but sad that I knew the answer before I opened the attachments because this isn’t the first or last time I’ll see this.  I’ll recreate the conversation: For full post, click here…

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