Cash Value Policy for Grandchild

[jboussea]

I'm confused.. I thought the LISR rider was the rider you wanted to add more cash value... the renewable term rider is the one design more for death benefit.

As I understood it the LISR rider is a term rider that increases the death benefit so it allows for more cash (Paid up additions) to be put in the policy without being a MEC ...

I'm not saying you're wrong but I just want some clarification.. if its not the LISR rider which rider you use to add more cash?

 

[jboussea]

Hello, I'm a consumer looking to buy a whole life $100,000 base policy for my 6 year old grandson. I have two 10 pay $150 a month premium illustrations ($18,000) from both Mass and NYL. NYL base of $100,000 with term rider (DOT term rider $65,000) which drops off after year 7.

Mass Mutual $50,000 Base Policy and a (LISR term rider $100,000). Both riders added to prevent a MEC.

The Mass Life Insurance Supplemental Rider (LISR) stays attached and it's projected crossover point is year 9, at which time I'm being told it becomes a permanently attached paid up DB. I was told if the policy does not perform as illustrated (a non guarantee) I would have to continue to pay for it until its crossover point. Additionally, NYL has PUA rider for around $173 a year. Neither illustration includes a GIO rider.

I have a question regarding Guaranteed, Mid Point assumptions and Current dividend assumptions. I've been using only the guaranteed amounts to judge the policies. It's important for me to make the correct decision because I will eventually be purchasing two additional policies for my other grandsons.

Many of the above posts mention Mass and other companies as preferred for GIO. My question is about the NYL vs. Mass expenses when it comes to cash values.

The guaranteed column illustrates the Mass policy out performing the NYL policy at year 10. The Mass policy's $18,000 premium with 150,000 DB in year 10 guarantees a CSV of $15,739 (-$2261). The NYL 18,000 premium with $117,962 DB has a CSV of only $12,115 (-$5895). That's a whopping $3634 difference in favor of Mass Mutual.

Using the Guaranteed values, the Mass Mutual policy outperforms the NYL practically every year. Using the mid point or the non-guaranteed columns, the NYL out performs the Mass product 20 years out. Should I rely strictly on the guaranteed values when making my decision, or can I consider the other estimates in the illustrations?

When I look at the non guaranteed columns the NYL illustrates much better at year 30 (CSV $53,357/ DB $265,000 vs. Mass CSV 43,522/ DB$196,780. If my grandson would just let the policy sit and use it to supplement his retirement income at age 70, the NYL out performs Mass by 60,000 in CSV and by 135,000 more in DB in the non guaranteed column.

Are there any unbiased professional opinions as to which values to consider when making a final decision?

I"ve never written a NYL policy but the general consensus is that the others are much better for cash accumulation so it surprises me that the NYL would beat the Mass Mutual policy in non guaranteed cash value.

As far as which column to pay attention to.. Historically at least the midpoint or the non guaranteed are the likelier scenarios

In layman terms, The guaranteed column is what you will get if the company never pays dividends for the life of the policy
The midpoint is what you will get if dividend rates keep dropping (i.e. if we go in a more prolonged low interest rate environment)
The non guaranteed is what will happen if the rates stay the same as they are now..
If rates increase ... you will likely get higher cash values than the non guaranteed column.


nothing is definite but this is how I would think about it.

by the way is the premium $18000 or $1800

 

[bluemarlin08]

If you are looking to build equity why not invest the same amount into an s and p index fund? Much more efficient.

 

[DHK]

I'm confused.. I thought the LISR rider was the rider you wanted to add more cash value... the renewable term rider is the one design more for death benefit.

As I understood it the LISR rider is a term rider that increases the death benefit so it allows for more cash (Paid up additions) to be put in the policy without being a MEC ...

I'm not saying you're wrong but I just want some clarification.. if its not the LISR rider which rider you use to add more cash?

Yes and no. LISR and ALIR riders are not the same thing with MassMutual.

He sent me the illustrations last night, and one thing I forgot about the LISR rider, is that the amount for both guaranteed and non-guaranteed cash values is based on BOTH the base whole life policy AND the LISR rider together, for more cash credited WITHOUT using the ALIR rider. It has this unique way of combining these benefits so you can have more cash values up front. (Not all companies are able to do this. Such as Assurity - the term rider is just a "bolt-on" rider that just increases DB, but doesn't do anything about additional cash values calculations.)

This method of death benefit calculation is making all the difference in this illustration that he sent me. (Looks like this agent talked to the right people after all.)

Actually, because he's being shown Mass's 10-pay policy (a true 10-pay vs paying for 10 years on a longer-pay policy that appears to be his custom NYL WL illustration) there's actually no room in the 10-pay policy design for using an ALIR rider.

I'll be sending him an email later on comparing the numbers for the NYL policy and the MassMutual policy and why it's working the way it works. On the surface, they look like similar policies, but they have vastly different results in the illustration.

I remember, back when I was at Mass, doing Legacy 100 policies with ALIR and LISR riders. Shorter-pay policies (10-pay for sure, can't remember about 20-pay) just can't use ALIR riders due to the premium structure inherent with these policies anyway.

 

[scagnt83]

Actually, because he's being shown Mass's 10-pay policy (a true 10-pay vs paying for 10 years on a longer-pay policy that appears to be his custom NYL WL illustration) there's actually no room in the 10-pay policy design for using an ALIR rider.

Maybe Im misunderstanding what you are saying here. But the Custom WL from NYL is not a life pay policy. The agent/client choose the exact paid-up year. It is called "custom" because you customize the paid-up period. It is guaranteed, not RPU. And it is their best performing product. It is overfunded internally by design like a 10pay or 20pay is.

Last I compared the two, Mass should beat the NYL Custom WL. But that all changes as carriers change product versions. And it can vary on age and UW.

A RPU Penn policy will beat both of them on the illustration.

And I always mix up the LISR and ALIR with Mass. Too many acronyms to keep track of... lol. If I remember right, the LISR is the best way to overfund.

 

[DHK]

Yes, but the cash value structure of the policy indicates something else going on. It's no where near what it could be, regardless of dividend scale. It's even far behind my max-funded Assurity Life RPU WL illustration I put together. Assurity looked far more like MassMutual than NYL did.

 

[f55c6]

I"ve never written a NYL policy but the general consensus is that the others are much better for cash accumulation so it surprises me that the NYL would beat the Mass Mutual policy in non guaranteed cash value.

As far as which column to pay attention to.. Historically at least the midpoint or the non guaranteed are the likelier scenarios

In layman terms, The guaranteed column is what you will get if the company never pays dividends for the life of the policy
The midpoint is what you will get if dividend rates keep dropping (i.e. if we go in a more prolonged low interest rate environment)
The non guaranteed is what will happen if the rates stay the same as they are now..
If rates increase ... you will likely get higher cash values than the non guaranteed column.


nothing is definite but this is how I would think about it.

by the way is the premium $18000 or $1800

I may have misspoke. The Mass Mutual policy beats the NYL on the guaranteed side up to year 40. Mass also beats NYL on the non guaranteed side up to year 21. That's when NYL starts increasing over Mass. I had a lot wrong. DHK helped me figure it out. And for that I thank him! He's a credit to the insurance industry.

 

[f55c6]

I may have misspoke. The Mass Mutual policy beats the NYL on the guaranteed side up to year 40. Mass also beats NYL on the non guaranteed side up to year 21. That's when NYL starts increasing over Mass. I had a lot wrong. DHK helped me figure it out. And for that I thank him! He's a credit to the insurance industry.

The premium paid over 10 years is 18,000 on the NYL and 16,016 on the Mass Mutual policy. I asked for a 18,000 10 pay. The last two years of the Mass policy is $962 in year 9 and $654 in year 10, according to the illustration.

 

[f55c6]

As a consumer, I want to thank everyone who has helped me with their professional input. Especially DHK. I studied, highlighted and made notes, but I just could not understand why the stark differences in the first 20 years or so between the NYL and Mass policies.

I wanted to give my business to my NYL agent who wrote a policy for me 20 years ago, but it just does not make financial sense to do so.

 

[adjusterjack]

A grandparent buys a whole life policy on a grandchild. The grandparent is the owner and beneficiary of the policy and can, conceivably, keep the cash value for himself or keep the death benefit for himself.

Does the grandparent need the written consent of the child's parent in order to take out the policy?