All Forum Posts by: Clayton Hepler

If your intent is to leverage the cash value for real estate investing, then you shouldn't be using a policy loan anyway. You should go to a bank and get a cash value line of credit. These are typically at Prime, which is well below 5% right now. The interest on a policy loan is not tax deductible. 

So if you are utilizing a poorly designed policy whole life and not gettng the tax deduction for the interest, you are probably right, its not going to work for you. I covered this in my weekly webinar last week: The 3 Key Success Factors for The Double Play.

1. You need a properly designed and maximum over-funded policy. You know you have this when your cash value to premium ratio is about 85% or better.

2. You need to access the cash value in a tax-advantaged manner.

3. You should use the right policy type. For any two policies with the same death benefit and the same premium, an IUL will outperform a WL because its cash value earns a portion of the "equity premium" whereas WL simply earns a "debt market" return. Both work off of the exact same mortality tables.

Also, its not fair to state that the fees will take a 6% dividend down to 5%. The fees could eat up all of the dividend and more in some years and based on poor policy design. You need to understand the underlying fee structure of the policy. There is a premium charge that is related to the amount of premium, there are Policy Issue Charges related to the Death Benefit amount and only assess during the surrender charge period, and finally the actual mortality charges. These vary as a percentage of the premium or growth based on whether the policy is minimally-funded (typical whole life) or maximum over-funded, or anywhere in between.