Risks

• NIW LIFE is not free insurance. While the strategy may show no out-of-pocket costs, that does not mean there will never be a need to pay something.
• Although NIW strives to analyze and anticipate policy performance along with interest rate fluctuations, we cannot guarantee positive outcomes each year.
• In order to obtain the most favorable loan rates from lenders, the loan needs to be fully secured. In other words, if the policy cash surrender value is insufficient to fully secure the loan, then outside supplemental collateral is required. And in some cases interest may have to be paid out-of-pocket by the client.

The interest roll-up design of NIW LIFE is one way to reduce a client’s costs and mitigate risk. As long as appropriate design assumptions and realistic interest rate forecasting are used at the onset, the product’s cash value should, on average, grow at a higher rate than the loan. Clients should be wary of strategies that use flat line loan interest rate forecasts, as they could be hiding a high profit margin for the lender and erroneously assuming a low underlying borrowing rate.