How is my money invested?
Your contributions and the contributions from the financing institution contribute to a specially-designed, equity-indexed life insurance contract.
Is my money subject to the volatility of the market?
No. The equity-indexed strategies in the contract do not lose money in down markets.
What is the projected rate of return?
The performance depends on your age at inception, your health at inception, the favorable tax treatment of the program, and the long-term performance of the markets. Request an invitation to estimate your benefits and your potential performance.
How will I know how my policy is performing?
You will receive an annual review and policy statement from the plan administrator. The review will contain information about the policy performance and amount of interest credited to the policy – along with the outstanding loan balance and current interest rates of the loan.
Why are banks and other lenders willing to invest in my financial future?
Legal reserve life insurance companies are very safe custodians of money. Financial institutions are very comfortable making loans at competitive rates collateralized by life insurance contracts.
Can I have a say in how the money is invested?
Yes. Physicians Financial Services will help you select the strategy for highest return for risk assumed in the contract. However, this is not a risk portfolio — no individual stocks, bonds, or mutual funds are selected.
Is the program best understood as a life insurance policy, annuity, or retirement plan?
It depends on the purpose. The LT-FLIP is commonly used as a extremely tax-efficient accumulation strategy, supercharging wealth accumulation to be withdrawn in retirement. But it is also the most efficient way to fund death benefit. It is not an annuity contract.
Why does the program use a life insurance policy?
Life insurance contracts enjoy very favorable tax treatment. Adding leverage (money from lenders) to a life insurance contract puts more money to work in the specially-designed, equity index insurance policy. Growth of assets inside an equity-indexed insurance policy are untaxed, and distributions can be received untaxed.
Is the money invested deductible or tax-deferred?
Premiums paid by you are paid with after-tax dollars. Premiums paid by the bank or other lender are not taxed.
Is the money’s growth tax free? Are withdrawals tax-free?
Growth of assets inside an equity-indexed insurance policy are untaxed, and distributions can be received untaxed.
When will I be able to access the income in the plan?
Normally the designs require you to wait until you are 65 or older to start accessing income, when you are retired and need it most. However, the loan is scheduled to be paid off in year 15, so technically after year 15 a participant will have tax-free access to the cash in their policy via policy loans.
The exact amount of income will depend on the performance of the product over time. The combination of lender matching, downside protection on the Indexed Universal Life policy (0% floor), and the tax advantages will all help determine the amount of income you can receive.
What companies are involved in the investment and management of my money?
Larger, legal reserve insurance companies rated A+ or better by major ratings agencies. Examples of eligible companies for this program are Pacific Life Insurance Co., National Life Insurance Co., and Allianz Insurance Co. Depending on your premium outlay, we are able to arrange for you to have a conversation with senior executives of these companies directly as you contemplate one of these structures.
Do my five annual payments need to be the same amount each time?
A participant in the program must commit to at least five years of level contributions.
Can I contribute for more or less than five years?
The plan can be designed to be funded by you for five years or more. It must be at least five years.
What happens if I cannot make a payment in the second, third, fourth, or fifth year?
It is imperative that the program is designed around a sustainable yearly payment from the participant. If the annual contribution cannot be made, the lender will call your portion of the loan and take the remaining loan amount out of the cash value of your policy. The cash value will be used to repay the loan or surrender the policy in full, and then the trustee will refund the remaining funds (minus any trustee or admin fess) directly to the participant. If a withdrawal from the cash value of the policy can be made to retire the loan, you can still maintain your policy and make premium payments as necessary.
If a subsequent payment cannot be made due to death or the inability to conduct two of six activities of daily living, the death benefit from the program would be paid.
What are the risks with this program?
The strategy has been stress tested based on historic economic volatility and maintains positive returns.
If you are unable to commit to five years of payments, this is not a suitable program.
Why does the LT-FLIP sound “too good to be true”?
One of our biggest challenges is hearing that the LT-FLIP sounds “too good to be true.”
The LT-FLIP is made up of an Index Universal Life policy and a safe bank loan that conforms to all the regulatory requirements the banks need to conduct normal loan structures.
The Index Universal Life insurance policy is an attractive asset for banks to finance because it accumulates cash value over time. The LT-FLIP is designed specifically so that the cash value secures the bank loan without personal guarantees.
The LT-FLIP design performs stress tests to account for worst case scenarios, meaning that the loan is still secured by the cash value in the policy even in a highly volatile market such as a recession or depression.
The LT-FLIP is structured where each policy is ring fenced and asset protected, which protects the lender’s loan from outside threats.
Why have I never heard of this product before?
Using leverage to buy life insurance is common with very wealthy families, because it allows individuals to afford more of the protections they need while maintaining their liquidity. Instead of relying on one wealthy family, the LT-FLIP achieves the same results by pooling the funds of groups of individuals.
So, although this is a new offering outside of the ultra-high net worth market, the practice of premium finance is something that has been used by the wealthy for decades. When structured this way, it is extremely unlikely for the lenders to lose their money. Thus, it is an attractive investment for them.
What are the benefits of this program?
No personal guarantee or collateral assignment is required of the plan participant. Plan participants are not otherwise be able to obtain this amount of leverage, supercharging their retirement without market risk, with no personal guarantee or assignment of collateral.
You may estimate your specific benefits with your invitation to access the program. Contact us to get started.
Can I craft multiple proposals and review them? Is there a time limit to act?
Once you contact us, we will grant you access to a portal where you can input your personal demographics and desired level of funding. You can craft multiple proposals at different funding levels to review, and there is no time limit to act.
We are happy to meet with you if you have questions, or if you would like a consultation to ensure your selection is suitable and fits with your overall financial plan.
Is the LT-FLIP available to successful individuals who are not currently residing in the United States?
Yes. There are solutions for non-US residents and non-US citizens to access and benefit from this structure. Contact us for details.