Decreasing Term Life Insurance

Written by Guest Author
Posted May 7, 2010 at 8:07 am

Life Insurance Quotes – Your Broad Options « financeinvestment
Decreasing Term life Insurance is primarily used to cover mortgages or other specific loans and the insured amount reduces yearly till, at the end of the given period it drops to nil. Level Term Insurance Policy has the covered amount … read more…

The Best Forms of Life Insurance Policy – Reviews on the Latest …
The third type is known as decreasing term insurance. In this case your monthly payments will stay the same, although the amount of cover you receive will reduce each year. * The forth type of term life cover is increasing term … read more…

Term Life Insurance vs Whole of Life Insurance | Insurance Quotes …
Next, we have decreasing term insurance, and in this type of policy monthly payments stay the same, although the amount of cover reduces each year. * The forth type of term life policy is known as increasing term insurance. … read more…

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Life insurance can be a tricky topic to discuss at any age, especially for people with young children. Discussing life insurance later on in life can be even more daunting however as making arrangemen… read more…

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here are mainly two kinds of life insurance; term life insurance that provides short-term cover and whole life insurance that provides lasting advantages for you and your loved ones both subsequent to… read more…

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As soon as you are familiar with the several advantages life insurance can provide you and your family in case of inopportune demise followed by financial emergency, it is time to explor… read more…

From GoArticles.com

Voting Question: What are some of the “Challenges/problems” that can present themselves with this solution?
Refinance commercial property
Jim and Suzanne had purchased a property in their old neighborhood because they knew of the need for low income housing for the area. They purchased the property for $500,000, and spent $ 300,000 and two years of their lives renovating the property. They are renting it at capacity now. The property has gross rents of $300,000 per year, and net operating income of $180,000 per year.
Jim is a very experienced real estate investor, and he knew that his best chance for him to recoup his capital investment was to approach the banks after the property was “proving” itself. He approached the banks with the following scenario:
Loan Request $ 800,000
Net Operating Income $ 180,000
Estimated Value (based on what Jim considered very conservative 9% CAP rate) $ 2,000,000
Projected Rate 7.5%
Projected Term 240 months
Estimated Payment $ 6,404.71 or $ 76,856.60 per year
Debt Service Coverage 2.34
In normal lending environments this is a very conservative and safe loan of 40% loan to value. However, right from the start, he ran into obstacles.
The lenders were not happy that the property was a former hotel, converted into an apartment building with only studio units. The loan was also small, which cut down the number of potential lenders to the local lenders. However, the local lenders do not like to lend to clients who are out of state, and therefore unlikely to have much of a banking relationship. Basically, their choice was narrowed down to a private money lender at a rate of 11.5% and 5 points, and at least 30 to 60 days to close. Their loan was also decreased to $500,000. After closing costs their net cash would have been $ 465,000, and their payment would have been $ 5,785.50 per month and the loan would be due in 5 years, at which time they would have to refinance the remaining balance of $ 415,443.
Loan Solution
Jim and Suzanne opened an account with Goldman Sachs under the Kinetic JBO agreement. They had approximately $ 1,200,000 in securities. Kinetic then placed their insurance instruments on the account and were able to provide a credit facility of $800,000 at 2.5%. The loan has no cost, and was closed within a week. Jim and Suzanne plan to pay this account down at the same pace the real estate loan required through the cash flow of the property. At that pace the loan will be paid off in 12 years. Meanwhile, the assets they pledged will stay on track for their investment strategy.
In the meantime, if commercial real estate lending does improve, they can pay the line down at anytime with no prepayment penalties, and still have the amount available if they wish. Over the next 60 months not only will they save over $250,000 in interest, they will also have the additional $300,000 cash with which to invest in other projects.

Resolved Question: Change of Cap for Equity-indexed Universal Life (EIUL)?
I was sold a Global Index Universal Life by Western Reserve Life. The index is a mixed bag of SP500, European Index and Hongkong Hengseng. high cap is set at 13.25%, and the bottom is set at 2%. When I ran a simulation for the past 20 or so years, I can expect a compounding annual return of 9% from the product. Comparing with the return of SP500 at the same period, the return is a dismal 6%. Investing in stock does not match the life insurance even I added another 2% of dividend from stock. Overall, in spite of heavy charges and expenses, this UL outperforms the scenario of investing the same amount of money in Roth IRA and a term life. Therefore, I am pretty attracted to it. The only uncertainty is that the insurance company can change the cap at its will, and so I am worrying about the probability that the insurance company will lower its cap. Some of my argument is
1) Can insurance company consistently makes more than those on stock market for a long long time, I mean, my life time? I know the money is not invested in stock, but on fixed-return investment and call options (learned from a website). I heard many times that 90% of mutual funds cannot outperform index fund for a 10 year horizon. and I guess some of the mutual funds use sophisticated strategy, which could include fixed-return investment and options. If these mutual fund cannot outperform index, can insurance company?
2) Of course, insurance company need not to worry about how much return they offer now, because they charge a heavy “per unit charge” (about 25% of target prenium) for the first 8 years (in the product I was sold). That is a reserve they keep for future uncertainties. Anyhow, the Equity-indexed life insurance is only around for 9 years, and the company I was sold may have the product for only several years. By that, I mean the possibility of reducing cap won’t be seen in the near term. But I will be locked in the product for life time (of course, I can surrender and pay tax, or transfer the cash value to another product, which is not a good idea either.)

3) I want to know some history of related products.
a) Whole life is indexed to the rate of saving account. Were there any decrease of returns in history? Are they big?
b) I heard on a website (forgot where it is exactly) that indexed annuities are offered earlier than indexed UL, and some of these annuities got into trouble, and the problem is spilled to EIUL now. Can anybody offer a little more insight on this?

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