And so your conclusion is that its better withdraw and pay tax as soon as possible, with 100% certainty, than to defer taxes and very likely end up paying none at all? That's not a winning strategy. It's not very difficult to calculate the maximum loan amount you can take without blowing up the policy especially in this case where everything is guaranteed - no variable loan rate, no nonguaranteed cash values. Theres a reason everyone in the industry does this concept, your nitpicking notwithstanding.
I already stated very clearly that in this specific scenario, it makes sense to maintain the policy (and even that it can also make sense without a pricing mistake if the math is right). But the reason is not the tax benefit that you allege (more on that in a moment). The reason is that you continue to accrue cash value at a fantastic rate, so that even if you somehow paid no taxes on surrender, it would still be worth going the withdrawal/loan route simply to allow you to access this fantastic rate of return. As far as not paying taxes on surrender, the scenario here is that the insured is 20 years old at the time of surrender - not likely to have other income. It would be pretty easy to avoid paying any tax.
I bolded the last part of your comment. I am absolutely nitpicking, and the first half of that comment is exactly the reason I'm doing so. I'm sick of agents and brokers who get taught a few generic sales concepts and all of a sudden think they know how this stuff works. Then they go and try to shoehorn every person and every scenario into one of those few sales concepts. In reality, every situation is different, and it's simple enough to do the math if you understand all the variables and make the proper assumptions. There are so many different ways to craft a financial plan, and both consumer and adviser should be open to all options so as not to miss out on the best one.
I'll tell you one thing - you haven't gained any credibility by making a statement
...Worst case, the policy blows up and you have nothing left. But you still paid no taxes.
being called out on the fact that you were incorrect
-1. If you lapse the policy while there are still outstanding loans, you pay tax on the gains at that point, just as you would for a surrender.
and then ignoring that point entirely.
