Help Me Understand My Policy!

[tlmarketing]

is that whole life really a good deal??

assuming age 23 for recent college grad in good health, you could 1035 the $4500 into a no lapse UL, pay $200 per year, and get a $100,000 guaranteed death benefit to age 106.

I would compare that to an inforce illustration before deciding how great that whole life policy is.

 

[sman]

is that whole life really a good deal??

assuming age 23 for recent college grad in good health, you could 1035 the $4500 into a no lapse UL, pay $200 per year, and get a $100,000 guaranteed death benefit to age 106.

I would compare that to an inforce illustration before deciding how great that whole life policy is.

Taking into consideration the future dividends, it may be great to keep. If death benefit is the goal, just get a term policy. But there are all kinds of potential future benefits to a participating whole life policy.

 

[DHK]

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

First, let's keep the thread on topic and ignore my comments on another thread about UL, okay? (I'm just not going to derail this thread, that's all.)

I am NOT misleading people. I am talking about how insurance WORKS.

I did NOT make up these terms. Click on the links above. I did not "create them" out of thin air.

The policy in your written example will pay out $10,000. That is the face amount. That is the death benefit.

The death benefit ($10,000) = net amount at risk ($9,800) + cash value ($200) - any outstanding loans.

It's quite simple.


Here's my declaration about this: If you cannot understand that... you should give back your insurance license to your state DOI. Call your advanced underwriting people and ask THEM if that formula is correct.

You NEVER have to take MY WORD for anything. That's why I post corresponding links. Just because you cannot understand it, even in simple terms, does not make me incorrect.

 

[scagnt83]

is that whole life really a good deal??

assuming age 23 for recent college grad in good health, you could 1035 the $4500 into a no lapse UL, pay $200 per year, and get a $100,000 guaranteed death benefit to age 106.

I would compare that to an inforce illustration before deciding how great that whole life policy is.

It is a very good deal. The WL will let him keep access to the CV if he needs it in the future. The GUL would just eat up the CV.

Also, based on the current performance, it is very likely that the policy will be over $100k by the time he is in his 60s or 70s. An inforce would definitely show over $100k by his 80s.

Also, this is a P65 policy.
Your scenario would have him pay cumulative premiums of $15,400. (over 77 years)
The current policy will only be a cumulative premium of $8,400. (over 42 years)

So your suggestion would have him paying almost double the Premiums... with no access to CV... and the DB at life expectancy will likely be about the same.

But I do agree that it would benefit him to get an inforce illustration so he has a better understanding of what the policy will look like in the future.

 

[DHK]

Perhaps a visual lesson in how life insurance works?

http://vsa.fsonline.com/vsap/pdfs/1a2-01-ST.pdf

Turn to page 7 of the link above. You might remember such diagrams from your pre-licensing days.

Imagine owning a policy like this for 20 years. The insurance protection (Net amount at risk) decreases as cash values increase... yet the face amount remains the same. (This is not including dividends to increase the face amount with paid up additions.)

The Death Benefit = net amount at risk + cash value - any outstanding loans.

Please learn your industry. These childish comments really annoy and set the industry back in its intellect.

 

[sman]

 

[DHK]

 

[WMG]

I'm a recent college grad and was recently handed a whole life insurance policy by my parents. They didn't seem to have a great understanding of its value and I certainly don't either, so I'm looking for some advice and my options before I speak with the insurance agent. Assume I have little understanding of what I've got here!

The policy is Northwestern Mutual 65-Life Whole Life Insurance. It was taken out more than 20 years ago. It's a pretty tiny policy but obviously has been growing for a long time. Not sure if I should cash it out or keep "investing."

Here are the details:

Basic Coverage: $25,000
Current Death Benefit: $38,000
Current Cash Value: $4,500
Annual Premium: $200

2014 Dividend/Cash Value Increase: 160/350
2013 Dividend/Cash Value Increase: 95/335
2012 Dividend/Cash Value Increase: 95/320

Would love to hear any thoughts!

Thanks.

Given that others have offered some explanation, I will contribute my advice...keep it! Pay the premium! Buy more! You won't be sorry.

In addition, start doing some planning now. Find a financial advisor, who you like, trust, etc. -- and do some planning.

----------

is that whole life really a good deal??

assuming age 23 for recent college grad in good health, you could 1035 the $4500 into a no lapse UL, pay $200 per year, and get a $100,000 guaranteed death benefit to age 106.

I would compare that to an inforce illustration before deciding how great that whole life policy is.

This is far too a myopic comparison and discussion. You can't quantify the guarantees that a whole life policy offers, accessibility to cash value, etc.; nor can you generically speak about the restrictions and limitations that a no-lapse UL would have. That said, it's not a product comparison. In my opinion, it's about the client.

 

[waterwheel]

Perhaps a visual lesson in how life insurance works?

The Death Benefit = net amount at risk + cash value - any outstanding loans.

Please learn your industry. These childish comments really annoy and set the industry back in its intellect.

Some people have been programmed to believe that the cash value is stolen upon death. That's false. Your explanation/equation is mostly correct, but the semantics cause confusion. I find this helps (with consumers, and slow agents):

Death benefit = risk/insurance + reserve - loans.

In other words, there is no cash value during the lifetime of the policy.

The goal is to get the reserve = death benefit, so the risk/insurance or NAAR goes to zero. Basically, the company saves up your premiums to equal your death benefit at the nice round statistical age at death. Which is what you'd expect them to do.

Now, if you quit the policy THAT's when they steal your cash value. They don't need the reserve any more, so they release it. They keep some of it (that's why insurance companies make a profit when you cancel a policy) and some of it is paid back to you and called a cash value.

The reserve is the death benefit and the cash value if you cancel. If you think the policy is $10K + $200 in cash that they keep when you die, you're wrong. The policy is $9800 and $200 in cash/reserve. That's what the actuaries do, they don't price out keeping cash values on death, they price out increasing reserves to pay claims upon death.

 

[DHK]

The cash values are made available to policyholders because of non-forfeiture rights. Before non-forfeiture rights and rights to access the policy reserve, you would be correct. There would be no "cash values" because it was the policy reserve.

But cash values are an asset that one can access (via withdrawal or loan) because of non-forfeiture rights and rights to access the policy reserve.

Other than that, you are correct.