My commercial banker called me the other day to tell me that my business loan was approved for $750,000 on the condition that I buy a life insurance policy to cover the bank’s loan risk.
I asked him what kind and amount of coverage and he told me that he would have an agent from the insurance division of the bank call me with details. The agent who called on me started to ask some very interesting questions about my assets and cash on hand, which I questioned at first. He explained that with proper information he could keep my cost much lower by having all my cards on the table. Then came the question of health which should have been a big monkey wrench in the gears given my history of prostate cancer. The agent said, not to worry, that he had many companies to work with. One would even see my risk as standard if I would be open to a planning strategy that involved parking some of my working capital with the insurance company to offset the cost of the death benefit. I really needed this commercial loan, so I said sure, I’m game for whatever it takes.
Weeks went by after my exam for coverage and sure enough, a mutual insurance company came back with an offer for standard rate coverage on a 70 year old man with a history of prostate cancer. The agent then asked for a meeting and requested that my accountant also join the conversation at his expense if necessary. I questioned why my $250 per hour accountant would need to be involved and he assured me I would understand in the first hour why he’d requested all the details no other life insurance agent had ever asked for in my entire life.
In a nutshell, a life insurance agent became my lender and financial advisor in one meeting by helping me understand something my bankers, accountants and investment advisors had never shown me in 45 years of business. The banker who sent this agent to me was not my advocate in the least and was certainly not acting in a fiduciary manner when I learned in 5 minutes that moving my cash to a mutual life insurance company would allow me to get a commercial loan for 3.5% while earning almost 5% on my money tax-free, net of life insurance expense!!! You see, my banker had asked me to put up my private home (protected by a homestead act in my state) as collateral and still charged me 9% for a loan that I was to insure at a cost of $15,000 per year on top of the interest cost to protect the bank! What a revelation it is when you allow yourself to take in new information in a desperate situation. I needed a loan to secure one of my biggest accounts and now a would be expense is a profit center, I’m calling my Mutual Business Bank. Commercial bankers will be sweating bullets when the word gets out about this incredible deal. I intend to share it with everyone I know!
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