jtb@eisx.UUCP (J. Burgess) (05/14/85)
Its not a new type of insurance, just a slight twist on
good old "whole life".
I've been doing something similar, but not as easy, with an
old policy of mine for several years.
It works something like this:
The dividend goes to buy term to cover the "cash value".
To pay the premium, you borrow from the cash value
(and/or use additional dividend monies).
Since there is a "policy loan", you have to pay the interest.
The neat part of this is that the dividend (income to you - sort of)
is tax free, while the interest you pay -- and you MUST pay yearly, in cash --
is tax deductable.
So, you get insurance coverage (which slowly grows),
and a tax deduction for the price of the interest!
Unlike most loans, where the tax benefit decreases over the years,
this one INCREASES. Of course, so do your cash outlays.
I do it because I anticipate steadily (if slowly) increasing income
over the years, and thus want increasing tax deductions,
and assume I'll also be able to afford the increased expense.
Unfortunately, with my stupid policy/company (MONY - avoid them;
I like NML better, but that's another story)
I have to fill out a form every year to cause the premium to be paid from
a loan. You seem to have found a company/policy that does this part for you.
One thing to watch out for: what is the interest rate on policy loans?
fixed (sometimes low, like 8%)?
or variable at "market" rates (more like 12-13%!)?
--
John Burgess
ATT-IS Labs, So. Plainfield NJ (HP 1C-221)
{Action Central}!eisx!jtb
(201) 561-7100 x2481 (8-259-2481)