About Mark Pace

T. Mark Pace

When there is an immediate need for cash at the time of someone’s death, it has been my experience that life insurance, when properly acquired and managed, is one of the best tools ever invented for the creation and transfer of wealth. However, life insurance is rarely acquired properly and, because it is mistakenly assumed to be a "buy and hold" asset, it is never managed. The resulting financial disasters are far too frequent and completely avoidable.

If you would like to learn more about any Pig-in-a-Poke blog posts or discuss any other life insurance issues, contact T. Mark Pace at Mark@objectivereview.com

 

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Pace’s Pig-in-a-Poke

About Pace’s Pig-in-a-Poke

Pace’s Pig-in-a-Poke, provides an arena for sharing the four great passions in my life. My three foundational passions are:

  1. Invest in yourself first;
  2. The genius in all of us, and;
  3. We can all live a long healthy life.

These three support my life work and my fourth passion; LIPM™ (Life Insurance Property Management).

As the blog title suggests, my focus is on debunking all of the myths, misuse, and muddled thinking that has accumulated in the life insurance industry. And, from time to time, I will go outside of the specific world of life insurance and share my views on my other three passions.

I hope you find my blog worthy of your attention, informative, and occasionally inspirational. I welcome your comments, questions and suggestions.

Mark Pace

One of the safest, highest return investments you may not be taking advantage of!

People who have borrowed money from older, participating, whole life policies are likely missing an opportunity to take advantage of some very high earning potential.

Many owners of these policies are not even aware they have been borrowing money because they assumed these policies eventually self-finance and, at some point, they stopped making payments. Others have taken money out without fully understanding the repercussions.

Here’s what happens: When premiums are not paid it is highly probable that an Automatic Premium Loan (APL) plus interest occurs to cover the premium payments. For policies issued after 1980, many have a provision called Direct Recognition that penalizes current dividends based on the amount of funds that have been borrowed. Between APL and Direct Recognition, the value of your policy gets hit with a double whammy.


The Poke: The insurance companies do not tell you about this because it is where they are currently making a lot of easy money. Consider these facts: on average a Whole Life policy with no loans against it pays about 6% to its owner, while one with a loan against it and a Direct Recognition penalty, earns the insurance company between 8 and 9%. If you were in their shoes, what would you do?

The Poke Exposed: Back in the 80s, things were a lot different; you could borrow at 4 or 6% and invest at 10%. But now, things are reversed; you borrow at 6% and in the case of short-term investments like a CD, you earn 1 to 2%.

Pace’s Poke Remedy: To remedy this poke, you simply need to do a little research and a little math. First, check your borrowing interest rate and compare against other investment returns. If there is no Direct Recognition Penalty, you are paying between 5 and 6% and if there is Direct Recognition, you are paying an effective rate of 8 to 9%.

A proper analysis will show you if the numbers make sense. So, if you were looking for an immediate safe return on your money, and you own old participating whole life policies from a quality company from which you have borrowed money, simply repay the loan and enjoy an immediate and guaranteed return of 6% and potentially up to 9%. That’s hard to beat in today’s investment market.

(Note: Tax deferral options can further enhance the benefits of repaying the loans, as you may never have to pay the taxes on the interest the policy earns. Also, in some cases, this strategy also applies to Universal Life policies with the understanding your returns will not be as great as the loan interest is around 5 to 6% and your returns will be 4 to 5%. Still, this beats a CD rate!)

T. Mark Pace is the owner of ObjectiView and the creator if Life Insurance Property Management™ (LIPM™). He and his team work with life insurance owners and their advisors to create the highest probability of the greatest return on invested capital at the termination of a life insurance policy.

If you would like to learn more about this Pig-in-a-Poke subject or discuss any other life insurance issues, contact T. Mark Pace at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

About the author

Mark Pace
Mark Pace
When there is a need for immediate liquidity at the time of someone’s death, it has been my experience that life insurance, when it is properly acquired and managed, is one of the best tools ever created for the creation and transfer of wealth. However, in my 35 plus years of experience, life insurance is rarely properly acquired and never managed… thereby creating a monumental financial disaster for many individuals that should never happen.

If you would like to learn more about this Pig-in-a-Poke subject or discuss any other life insurance issues, contact T. Mark Pace at Mark@objectivereview.com

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