Policy Loan Rate

Policy loan rates. There’s a lot of discussion on this for the insurance companies, variable loan rates. Most of them are all tied to the Moody Corporate Bond Index Rate. Again, each company has also a floor variable interest rate. Some of them are at 4.5 or 5% as a floor, as a lowest total goal. And the corporate bond rate, I think right now is maybe like a two point something percent, so that you’ll see that variable interest rate loan interest rate has been there at the floor for awhile.

We anticipate it to stay there. Again it’s higher than what you can get at a bank. There is the collaterized cash value loans are gaining his popularity and there’s a bunch of people in the FOOM doing that so that’s good. The company does declare their variable rate annually, and I know it becomes effective on your policy anniversary date.

And it can go jump higher than 0.5% per year, but it can drop. So say the interest rate jumped up to 8% for some reason. Your variable policy interest was at 5%. It can only go up to 5.5% in that year. And then each year, when you 0.5%, if you were at a higher interest rate, said 8% and it dropped to 4%, there’s no limit as far as how low it can drop other than the company floor. So it could drop all the way down say the floor of 5%. If it was, you were at eight, that’s the limitations there.

And I think a lot of people outside the family office group, they don’t realize this stuff. It was new to me. You guys, that’s how I have this group because you guys find some cool stuff. Personally, I don’t know if I’m ever going to go to a third party bank, even if it is for 3.5% interest rate, I might just be, I like the convenience of paying the 5%. Well, I guess if you’re starting to take a loan of more than half a million dollars, it adds up. But personally, I don’t know to me, like going to another bank signing over your life insurance, like maybe just I haven’t done it and I think it’s difficult. I haven’t done it yet. That’s where you can get extra returns out of this thing by doing that.

And when you do it, do you lose the asset protection part of it if your state qualifies for asset protection? Yeah. I see what the next slide touches on some of that.

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