Help Me Understand My Policy!

[pancaker]

Thank you all for your input. I was originally considering just taking the cash value as I'm very cash strapped, but I have a much better understanding of the policy's value now. I'm going to just not touch it and continue to pay the premiums.

Thanks again everyone!

 

[Robert Barney]

Robert...

It's called "net amount at risk". The death benefit = net amount at risk + cash values - any outstanding loans.

The cash value IS paid out at death.

Absolutely false, and not an explanation you will find in any policy contract.

 

[DHK]

There are lots of things you won't find in a policy contract. Policy contracts don't EXPLAIN how they come up with figures. They explain what benefits are payable and when.

Just because "interpolated terminal reserve" isn't in a policy contract doesn't mean it doesn't apply to that policy.

http://definitions.uslegal.com/i/interpolated-terminal-reserve/

Interpolated terminal reserve refers to the method by which the reserve on any life insurance policy between anniversaries are determined by valuing insurance policies for gift and death tax purposes, regardless of whether the policies are not paid at the time of their transfer. It is determined by making pro rata adjustment upward between the previous terminal reserve and the next terminal reserve. In case of certain term policies of long duration it is determined by making pro rata adjustment downward.

Policies also don't warn about "phantom income" when surrendering a permanent policy that has an outstanding loan against it either.

For reference:
http://www.forbes.com/sites/peterjreilly/2011/08/04/phantom-income-from-life-insurance/

They keep it simple for the consumer. The consumer does not need to have definitions or formulas. They want benefits.

For example, this excerpt from Assurity's Par-WL sample policy:

Amount Payable. The amount of Proceeds is equal to the Face Amount in force, increased by the amount of any:
- benefits payable under any riders attached to Your Policy;
- Paid-Up Additions;
- Dividend accumulation;
- Dividends payable at the Insured’s death; and
- Premiums paid beyond the date of the Insured’s death.

We will reduce Proceeds by the amount of any Premiums due and unpaid and any Loan Balance.

Looks like face amount - any loan balance.

But what is the face amount in a permanent policy? Face amount = net amount at risk + cash values - any outstanding loans.


And no, I'm not going to argue with you... because I've found it pointless.

 

[Robert Barney]

There are lots of things you won't find in a policy contract.

I rest my case.

 

[scagnt83]

I'm not seeing a lot of numeric analysis here. I would need more facts to comment intelligently.

The fact that the policy is at the stage where it is increasing more in CV than he is paying in premium tells a knowledgeable agent that this policy was designed well and is a good thing to keep.

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The only way to get the cash value, without quitting the policy, is to borrow it. If you have to borrow it, it's not your money.

That statement is 100% incorrect.

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Now those who have talked about how great the policy is, may be correct. But I don't see how anyone can comment intelligently without having more facts.

Again, the numbers he gave (assuming they were correct) are more than enough to tell if the policy is performing well and what to generally expect in the future.

You are correct that only an inforce illustration can give us projections of exact values. But simply comparing the CV increase to the premium paid is more than enough to have a general sense of its performance for any agent who is experienced in dealing with WL insurance.

Also, I am familiar with that specific policy line. It is one of the highest quality P65 WL policies out there. I would rank it in the top 5 or 6.

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Dividends are NOT guaranteed.

That is correct. But the CV will increase even if a Dividend is never paid. Also, North Western Mutual has paid a Dividend every single year for over 150 years straight.

 

[Norwayguy]

The fact that the policy is at the stage where it is increasing more in CV than he is paying in premium tells a knowledgeable agent that this policy was designed well and is a good thing to keep.

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That statement is 100% incorrect.

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Again, the numbers he gave (assuming they were correct) are more than enough to tell if the policy is performing well and what to generally expect in the future.

You are correct that only an inforce illustration can give us projections of exact values. But simply comparing the CV increase to the premium paid is more than enough to have a general sense of its performance for any agent who is experienced in dealing with WL insurance.

Also, I am familiar with that specific policy line. It is one of the highest quality P65 WL policies out there. I would rank it in the top 5 or 6.

Easy on Robert as he is busy suing 400 agents for the actions of a third party.

 

[scagnt83]

Easy on Robert as he is busy suing 400 agents for the actions of a third party.

Very true...
Im just clarifying the actual facts for the OP who is not an agent... actual licensed agents who sell WL know that his post is misleading and biased... we also know that he makes a living on selling Term Life quote software...

 

[DHK]

Easy on Robert as he is busy suing 400 agents for the actions of a third party.

If one is so busy... they shouldn't be posting unless they can be clear, concise, and complete.

I doubt a prosecuting attorney and judge would say to a jury to "please excuse Robert's lack of knowledge on his post. He was busy suing 400 agents when he was wrote his posts that were full if inaccuracies and half-truths."

I know, that's an extreme example... but distraction and human error is why we have E&O... that we hope to never need to use.

 

[LGilmore]

Bob? You're still around?

I would counter but so many have said it so well so often already.

I am sure you miss the section where you could say all sorts of stuff and not have it be creditable at all.

Good luck with your suit Bob, glad to hear life is easy for you these days.

Cheers.

 

[Golfnut2112]

Robert...

It's called "net amount at risk". The death benefit = net amount at risk + cash values - any outstanding loans.

The cash value IS paid out at death.

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What is net amount at risk? definition and meaning

Amount at Risk Definition | Investopedia

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And you're correct... life insurance is NOT free. But having had his parents pay for that policy for 20 years... makes it very good... plus level premiums from that time makes it a great asset to have and to continue.

And you're correct... the money is "not his" if he has to borrow it. Why is it not his? Because the money is funding the death benefit. When a loan is taken out, it will reduce the net death benefit.

In short, you will have taken out a loan... and it is repaid first from the total death benefit before the check is disbursed to your beneficiaries. Responsible people would have enough life insurance to resolve all their debts, so this really shouldn't be an issue.

While it's "not his"... he has full control over that asset, as long as he knows what his options are and the consequences of those options.

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Northwestern Mutual has had a great history of paying dividends. The dividend SCALE is not guaranteed... but receiving A dividend for the foreseeable future is very likely.

Dividends are not guaranteed because they are based on four primary factors:
1) Mortality experience of the company (if more favorable, means more profitability)
2) Investment results of the company's general account
3) Sales of new policies and receiving new premium into the company. You'll notice that dividends are scheduled to increase every single year, and must be fueled by new premiums coming into the company.
4) Policies that lapse. Yep, that helps the company because they get to keep the policy costs and add them to their bottom line. In short, yes, life insurance companies are a great, moral ponzi scheme that serve the interests of their policyholders.


But Robert saying these things without explanation doesn't help anyone have any idea behind those statements.

The cash value is paid on death? The cost of insurance does not increase every year on a UL policy? How do you come up with these crazy comments? The cash value is paid on a UL policy if that death benefit option is chosen. It will not pay out in the OP Northwestern policy. You are just confusing the matter when you start talking about net amount of risk, and I really dont think you understand what it really is.
If I had a $10,000 policy with $200 of guaranteed CV and I die the policy pays $10,000 period. For you to say my policy is really worth $9800 and the company pays the $200 CV in just stupid. My policy is a $10,000 as shown on the dec page and they keep the $200. In the end its all symantics but you are really misleading people with that kind of explanation, and your thoughts about the UL's, is just dangerous