A little help with existing whole life policies

[T in CA]

I have a client who has several whole life policies which he has been paying on for years. They are excellent policies with a high quality carrier and I do not advocate him exchanging or dropping them. However, he is paying a considerable amount annually and has asked me if he has options to adjust/reduce/stop some of these premiums. To give you some more information...He has 7 policies with a total death benefit of about $8.5 Million for which he is paying $120,000 annually. The oldest policy is 18 years old and the newest is 9 years old. He has over $1.5 Million in cash surrender value.

They are all with an excellent carrier (think capital G), but he has lost touch with his agent and just wants to know what his options might be. Can he call the company directly to find out? He does not anticipate ever accessing the cash (nice to be him!), so I would think there would be a way to reduce or stop premiums in some cases...but I haven't dealt with whole life in a long time. All policies are either "paid up at 96" or "paid up at 99". I'm sure you may have questions. I just want to give him good advice and am not looking to profit on my end. I have done other things with him.

Thanks in advance for any insights.

 

[DHK]

He can always do a "reduced paid up" at any time to lower the death benefit and eliminate premiums. Since each policy is past the 7-year mark, there shouldn't be any taxation issues regarding accessing the cash values.

 

[Newby]

I have a client who has several whole life policies which he has been paying on for years. They are excellent policies with a high quality carrier and I do not advocate him exchanging or dropping them. However, he is paying a considerable amount annually and has asked me if he has options to adjust/reduce/stop some of these premiums. To give you some more information...He has 7 policies with a total death benefit of about $8.5 Million for which he is paying $120,000 annually. The oldest policy is 18 years old and the newest is 9 years old. He has over $1.5 Million in cash surrender value.

They are all with an excellent carrier (think capital G), but he has lost touch with his agent and just wants to know what his options might be. Can he call the company directly to find out? He does not anticipate ever accessing the cash (nice to be him!), so I would think there would be a way to reduce or stop premiums in some cases...but I haven't dealt with whole life in a long time. All policies are either "paid up at 96" or "paid up at 99". I'm sure you may have questions. I just want to give him good advice and am not looking to profit on my end. I have done other things with him.

Thanks in advance for any insights.

He can go reduced paid up and you can do comparisons before he does to 1039 exchange them to a new single premium policy with a different company. Sometimes he can get more by Transfering the cash to a new company. Sometimes not.

 

[T in CA]

He can always do a "reduced paid up" at any time to lower the death benefit and eliminate premiums. Since each policy is past the 7-year mark, there shouldn't be any taxation issues regarding accessing the cash values.

Thanks you!

 

[DayTimer]

However, he is paying a considerable amount annually and has asked me if he has options to adjust/reduce/stop some of these premiums

Make sure you show him how much his cash values are increasing each year he pays his premium. I have a client in a similar position (orphaned policy holder) and he asked if he could stop paying his premium and take the reduced paid up. His premium was $1400/year but the dividend at this point is $4,000/year.

He decided paying that premium was a good thing after all.

 

[marindependent]

Sorry If I missed this, but

• How Old Is he?
• How is his health?
• Does he work?

 

[titeye]

Before you advise him on doing anything, it would be wise to ask him how all of these policies fit into his overall financial plan or objective.
Only then can you offer him any advice on what to do with the existing policies.

 

[Allen Trent]

I would not suggest reduced paid up until that is a last resort. I say this because reduced paid up will convert all his PUAR funds that are accessible & possibly paying better dividends to be combined with the base CV. While that isn't a huge problem, it does force him if he does ever want to tap the money to have to borrow it. This is because the base CV is only accessible by loan or full surrender. Whereas PUAR funds can be partially surrendered as needed or borrowed.

Here is always how I walk down the path with someone in this situation.

1. Switch the Dividend option to reduce premium. This will apply the annual dividend to cover part or all of the annual premium depending on how big the current dividend is compared to premium.

2. If dividend is not enough to cover the full premium,best for him to pay the difference out of pocket. This will perform best.

3. If he doesn't want to pay balance of premium out of pocket, he could ask for his balance of premium to be paid from PUAR values. This may be called something like APPO. Alternate Premium Payment option. Basically, doing APPO will change Dividend to reduce Premium & surrender PUAR to cover balance if needed. Won't look as good as him paying balance of premium out of pocket

4. Always choose Reduced Paid up in the future. I just don't think it would be necessary now or possibly ever. Won't look nearly as good as 1st options above.

He should call the headquarters & ask for these options A. Switch Dividend to reduce Premium & pay balance by client. B. APPO

Also have him confirm if the policy has any loans on it. If there is, he could address the loans by either paying off or surrendering PUAR to pay off. I have seen a ton of these where agents writes a pile of policies on same person, but stopped premiums on the older policies & had the policies borrowing from itself to cover the premiums. Many of the policies in situations can be in very bad shape in those kind of scenarios

Walk slowly for sure. Too much to risk by moving too quickly

 

[DayTimer]

Walk slowly for sure. Too much to risk by moving too quickly

Indeed, neither the client nor the agent realize the true value in these polcies.

 

[T in CA]

Sorry If I missed this, but

• How Old Is he?
• How is his health?
• Does he work?

53; preferred plus (at least he was with me a year ago); working making $2-$5 Million year