Creating an efficient whole life policy

Dec 25, 2018

  1. Dmully
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    Dmully New Member

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    Looking to buy a $1mm whole life policy. Have done some research but the more I read the more confused I become. Was hoping for suggestions - I know blending and PUA are the way to go but hoping for more detail. Also, what mutual company would you suggest.

    Thank you in advance.
     
    Dmully, Dec 25, 2018
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  2. pfg1
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    pfg1 Guru

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    Yes, setting up to max fund is typically the best way to design, assuming that meets the goals of the client. Whole life can be designed in many ways. If you are not an agent, its best to work with someone very familiar with that product and how to get the most out of it for you - based on your wants and needs. People purchase perm insurance for many reasons and thus the design options can be very diverse. I responded on your other thread, there are many good companies...personally for WL I like to use Penn most of the time, but other carriers are good also. Which carrier is the best fit can sometimes depend on what the client wants to accomplish.
     
    pfg1, Dec 26, 2018
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  3. Dmully
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    Dmully New Member

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    thank you -- i actually have a call into Penn -- Any thoughts on what the optimal term/perm blend should be?
     
    Dmully, Dec 26, 2018
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  4. Allen Trent
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    Allen Trent Guru

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    Here is what I have done for myself with nearly the same type of goals that you mentioned(already adequately saving in other investments, want to most efficiently build the CV but hope you never need to access it, leave to heirs tax free if you don't use it).

    1. Make the base WL policy the smallest you can for the amount you are willing to commit to paying forever.

    2. Add term riders, not only for additional protection element, but also because it can help increase the IRS Premium allowed to be put into the PUAR values to retain it's status for tax efficient distributions of the CV

    3. Max out what the carrier will allow you to put into the modal PUAR value annually. IE- 3x the base premium or more. this maxes out the accessible CV long term as PUAR funds can be surrendered at any time instead of being required to take loans for PUAR like has to be done for base policy CV. You can take a loan against PUAR if you wish & plan to repay, but you are not required to borrow PUAR like you are the base policy CV

    This type of set up gives you the best funding, protection without being obligated to the commitment if something long term should occur.

    Below is an example of what I have done for myself at age 47on 1 of the many products I own(I don't sell to consumers nor am I licensed in MA, so I am not trying to sell you, just trying to show what I am talking about).

    1. $200k base WL --$3000 yr
    2. $100k 10 yr term rider (I already have tons of term, so I only added enough to make the govt premium allowed high hi enough to fit my desired total overfunding--you could add $800k of term for 10, 20 or 30 year durations based on what you want it for). - $239 yr
    3. PUAR Max funded --$9660 yr

    I would start by asking agent/carriers for their specific PUAR rules of the max amount you can add to a policy at issue & what the ongoing requirements are to maintain that rider. IE: if you don't make a PUAR contribution in a year, will your ability to ever make future PUAR deposits end, or are you allowed to maybe make PUAR deposits up to 1x the base WL premium as long as you have been compliant with the PUAR rider requirements. Some PUAR riders to add more deposits will cease if you fail to make a deposit for say 5 years consecutively ( this is because the carrier is allowing you to increase your policy with Paid up insurance, so they generally need to put some controls on it as they will have no idea if someone is insurable in the future).

    My projection on my policy above illustrates at age 80 as having $1.3M of death benefit, $880k of total CV ($760k of that total is in the fully accessible PUAR funds)

    PS -- some agents will want you to put more in the base WL policy as that is how they get paid. the overfunding component pays very little compensation as it is treated much more like a annuity for the carrier as it is optional savings-like, not like the base WL committed/required premium. Find an agent & a carrier that will let you max out the PUAR component if you are already truly insured & invested in other savings/retirement plans. Start with what you want to put into a plan annually, then likely make the base policy 25% of that premium & 75% the modal PUAR portion if you can.

    Hope this helps & good luck
     
  5. Dmully
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    Dmully New Member

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    This is exactly the information i was looking for -- thank you very much.
    Do you gave any options on Penn Mutual -- they seem flexible.
     
    Dmully, Dec 26, 2018
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  6. Allen Trent
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    Allen Trent Guru

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    I do not personally know Penns exact specifications, but I am sure others will respond that do. I have heard that they tend to be more flexible with their PUAR than some of the other carriers. Here are the questions I would ask:

    1. What is the max I can apply for PUAR as a ratio to the base WL policy?
    2. What happens the following year if I don't pay the max ( ie- do they let you at least pay 1x the base WL if you paid a small amount 1 year.)
    3. How many consecutive years without any PUAR deposit would cause the PUAR rider to be removed
     
  7. Purdue
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    Purdue New Member

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    1. Base: So, all the expenses are in the base WL? But Base premium builds the guaranteed column right? So, someone wants guarantees, then they go with more base premium? So, in your example of $3000, some portion goes towards the cash value in the guaranteed column?

    2. Term Rider: Is this term rider more expensive than regular term policy?

    3. PUAR: Isn't there a premium load for this?

    Not an agent, just trying to understand more.
     
    Purdue, Dec 26, 2018
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  8. Allen Trent
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    Allen Trent Guru

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    Last edited: Dec 26, 2018
  9. jboussea
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    jboussea Guru

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    blending PUA are the way to go IF your goal is to maximize cash value. But if your objective is looking to buy a $1mm WL policy, it doesn't sound like the goal is to maximize cash value.

    Death benefit should not be your starting point if cash value is the goal.

    That may be also the reason why you may be confused.
     
    jboussea, Dec 26, 2018
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  10. Lloyds of Lubbock
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    PUAR carries a sales load.
    PUAR also has a guaranteed value.
    Whomever runs your illustrations can add a total guaranteed cash value column.
    Your one year term also carries a sales load.
    Penn will give you the best illustration.
    They will go 2/3 term and 1/3 whole life
    Does that mean it is the best policy, time will tell.
    Their PUAR also carries an 8.5 % sales load.
    I would look at company financials as part of my decision making process.
    Also look into features, does waiver cover your PUA payment?
    Mass does not, Guardian does not sure about Penn.
    What is the definition of disability on waiver?
    How long is own occ for....or is that even important to you.
    Max PUA is great, there are situations where a withdrawal can cause a MEC, especially in the first 15 years
    How important is the protection element for you?
    Good luck!
     
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