Aboutleboyd Expertise I can answer questions relating to life insurance, estate planning, business succession/continuity planning and tax-effecient retirement planning. I have advised clients for many years on these areas, and how they relate to life insurance.
Likewise, I have worked with many on Long-Term Care needs.
Experience I have been a top producer for the past 5 years. Prior to that I was the CEO of an international company, having the concerns from a clients perspective (now having been a client of NYL for more than 15 years)
Organizations Society of Financial Services Professional
Million Dollar Round Table
Education/Credentials In addition to an BBA and an MBA from a top-10 school. I have earned the LUTCF, NASD Series 6, 7, 63 and 66 licenses.
Awards and Honors Top Life Producer
Top Long-Term Care Producer
Question I am very interested in the concept of taking home equity to buy an EIUL. My concern is if the insurance company becomes insolvent, I will only have up $100,000 of protection from the CA Guarantee Association(from what I have researched on my own). If an EIUL is funded with 50k, 75k, 100k for the purpose of letting it grow to use as a source of retirement income 20 to 30 years later, the risk would be significant as your cash value should be far above $100,000. What are your thoughts on this?
Answer Darren,
I am unaware of anyone who has actually lost any death benefit or cash value because of a failure in a company. Historically, the policies are picked up by another insurance company, providing the same protection and cash value.
What can change in this situation is the contract language. When a company takes a policy from a failed company, they have the right to change the contract and thereby affect the purpose of purchasing the contract.
I'm not a big fan of EIUL, but that's irrelevant. The key is to make sure you purchase it from a very stable company - and that doesn't mean a company who advertises a lot.
Verify the credit ratings of the company - remembering that an "A" rating doesn't mean the same thing it meant in school when you made an "A" in a class. An "A" rating can actually be an average or below average rating. Look at the rating system of the rating organization and then consider the rating of the insurance company. This is the best way to try to protect yourself.
One item that you might want to consider is whether you want to load up the policy at the beginning of the policy. A life insurance contract has tax free growth *as long as the policy doesn't "MEC"*. Prior to 1989, you could put as much into a policy as you wanted without losing the tax advantages. The tax laws changed wherein if you put too much into a policy too quickly, the government considers that you are using it mostly for investment and not for insurance and therefore taxes the withdraws based on regular income tax rates. (The death benefit will still be income tax free on MEC policies. It's only the withdraws that are affected.)
Each policy is different depending on the face amount and the insurance rating. The insurance company will provide you with the maximum amount you can put into the contract in any single policy year without causing the policy to MEC. Based on your question, you will want to stay below this amount.
