Full 2015 Reading List
Read It Because: It will expand your knowledge of the art of the possible when it comes to saving money. My father-in-law has explained this before but I am woefully ignorant when it comes to investment and finances so this book was a good opportunity for me to review the principle behind a specific type of life insurance. My main critique on this book is the incredibly poor editing job. Even basic proof-reading would have caught several of the mistakes.
Read It Because: It will expand your knowledge of the art of the possible when it comes to saving money. My father-in-law has explained this before but I am woefully ignorant when it comes to investment and finances so this book was a good opportunity for me to review the principle behind a specific type of life insurance. My main critique on this book is the incredibly poor editing job. Even basic proof-reading would have caught several of the mistakes.
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Last annotated on November 12, 2015
Once dividends are paid by your life insurance contract, they become guaranteed cash value if reinvested in the contract. However, there is no guarantee that the life insurance company will declare a dividend.Read more at location 807
Some permanent life insurance policies contain surrender penalties if you surrender your policy (different from borrowing from your policy) and unpaid loans and interest on those loans could result in a policy lapse (an involuntary surrender) resulting in taxable income if your cash values exceed the premiums paid.Read more at location 826
The insurance company gives you the loan and only charges interest (the principle payback is up to you). If you have enough collateral capacity, you can let the interest increase the loan and not even pay the interest.Read more at location 834
One of the most common questions I hear is: “should I pay back the loan?” The simple answer is “yes.” If you are in your earnings years, you should pay back your life insurance loans. The answer is “you don’t have to” if you are in your retirement years (but make sure you know where your borrowing limit is).Read more at location 847
2. You did not lose your compounding. Because you secured your loan through the guaranteed collateralization features of your life insurance contract, your gross cash values (not reflective of the loan) did not change and your dividends were granted based on the gross cash value not the net cash value.Read more at location 931
Non-direct recognition means that the insurance company turns a “blind eye” to the fact that you have a loan outstanding when they grant their dividends to your contract. The best policy is the one with a “non-direct recognition” dividend policy.Read more at location 939
Be careful: you want an insurance company that will add the premium to the policy, not one who merely waives the premium.Read more at location 992
“The secret of wealth accumulation is this: whenever you relieve yourself of a regular expenditure - whether it be some ongoing expense or a debt repayment stream of cash that has satisfied the debt - continue making those payments, but to yourself.Read more at location 1043
year. The insurance policy shown is an example of a fairly standard policy. It is assumed to be a policy from a company that uses the non-direct recognition rule when it comes to crediting dividends, and this can make a big difference. This difference can be mitigated with the proper policy design. Some insurance companies provide a way to link the dividend rate and the loan interest rate. If this is possible, it serves a great advantage because the dividend credited on gross cash value (the bigger number) uses the same rate as the cost of the outstanding loan (the smaller number). The dividends assumed are not guaranteed and may result in the policy projecting to something considerably less than age 100.Read more at location 1106
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