High Value Term W/ Whole Conversion Company and Strategy Thoughts

[pfg1]

Sounds like you have a pretty good idea of what you want.
I would certainly consider the options of utilizing the cash value as a tool, especially in regards to tax free cash flow / retirement supplement. I prefer ON for that. Its hard to recommend something specifically when we only know a little of your situation.

 

[aclaro]

Breakpoints. It's cheaper to buy a million dollar policy than two 500k policies. In fact, if you look at the premiums, it costs almost the same for $1 million 30 year as it does for 500k 25 + 500k 30. Just get a million of 30 year. The same is pretty much true for a million of 20 vs 500k 15 + 20.

If you really like complicated and full of options go with $500k Met 10 year, $1 million of ON 20 year and $1 million of NA 30 year.

For the record, I prefer MassMutual over Guardian and ON. Again, don't know the specifics but in my opinion and experience it's the best WL on the market today.

 

[bluezebra48]

Why not just get 2.5 million for 30 years with best rate and options you want and then reduce along the way?

 

[cowgoesMoO]

Why not just get 2.5 million for 30 years with best rate and options you want and then reduce along the way?

That's way too simple for this guy

 

[meclimit]

Another option worth considering is going with a WL policy and a term rider. The term rider is usually of the YRT non-level variety, but often has its own conversion features. Its a lot simpler than trying to ladder term policies, plus it secures the client some permanent coverage that will stand on its own even if the term is dropped or reduced at a later date.

One other advantage -- the premiums paid on the term rider count as basis for the WL policy if there is ever a need to take cash out of the policy via partial surrender or 1035 to an income annuity at a later date.

 

[DHK]

There are some WL policies that have 10- or 20-year terms on them, but I'm not sure if the rider also counts as basis for the WL policy.

If I remember correctly, WL + ART with some of the major mutuals will let you put in a lot more cash into the policy with the higher combined death benefit.

Other companies either haven't figured it out or just don't do it that way.

 

[scagnt83]

There are some WL policies that have 10- or 20-year terms on them, but I'm not sure if the rider also counts as basis for the WL policy.

If I remember correctly, WL + ART with some of the major mutuals will let you put in a lot more cash into the policy with the higher combined death benefit.

Other companies either haven't figured it out or just don't do it that way.

The level term rider does indeed count as basis for most carriers I have seen. It is often the best way to max out a WL. It is also a great way to get a large amount of coverage while still maxing out CV.

 

[L5tc]

It's called decreasing Term Rider, enables more cash to be put in WL while adhering to 7 Pay limit.

Who lets one use those riders as free standing term policy and wouldn't there be pre existing limits on the face amount. Some of these features come and go with the marketing depts it seems.

 

[rayluk]

You are way overthinking it; and I have an engineering background. Lol.
Layering is a good strategy. By layering, consider factors such as:

remaining mortgage payment period
length of time until you are free from being financially responsible for your children (hint: never)
If you plan to pay for their college, how long and how much.

Those are needs with finite period. You can now figure out your term ladders. Any permanent insurance, particularly whole life products can replace the term.

Now for practicality, layering a 15 years term with a 20 or 30 years term may not save you much premium once you look at the numbers. Breakpoint and base policy fee sometimes may cost as much as the cost of insurance. So work with someone who is patient, umm, very patient to compare the numbers with you.

Since you are considering whole life products; and you want full conversion options and range of products with ample flexibility, consider going to big mutual companies. I am with NYL so I am biased. Here are some other considerations when thinking of conversions:

- Original age term conversion. Not sure if other mutual offers that. It allows you to convert your policy (partial or whole) back to your issued age on original policy.
- future purchasing options (without future underwriting)
- consider using annual renewable term (cost goes up every year based on age), you get the cheapest term insurance for the first 5 to 7 years, which are typically when you want to covert your policy progressively. Cost is typically half to 1/3 of a 20 years term.

I work with many engineers in my area. Most of them start with big term coverage like yours. Most only go through underwriting once and get the coverage correctly. There are plenty of conversion options, extension of conversion options to serve their need. Work with someone knowledgeable and experienced on the full range of products and options with their respective companies (most actually is not known to clients even if they read the whole insurance contract).

So back to your approach to plan and solve your problems, you are most likely overthinking it. There are things you know you do not know (you know quite a lot!); and there are things you do not know that you do not know. It is the latter

Reading what you wrote reminded me of a very good client. We wound up with 7 policies between him and his wife when they were expecting their first child - I thought that was a bit too much, but those were their choices. We converted most of them during the first 5 years.

Hope that helps

 

[jcc]

Thanks all for the great advice. One of the problems is that few I have met seem to consider (know, want to sell, or perhaps choose to sell) all the policies and so by finding out which policies and plans are likely to make the most sense I might be able to turn this from the original few that were selected and being told they are all about the same, to truly selecting from the best.
At present, my thoughts are to review for the cheapest (for some of the terms) and also ask that particular attention be made to the offerings of ONL, Midland, NA, NYL, MM, and Guardian; then pick from there.

As far as the taking of a 2.5 or 3M for 30 yrs and decreasing as you go, jab aside, I'll need to see how that financially compares. I'd expect it to be a nice, but expensive approach.

...but I've never done this before. Big expenses, and to me worth taking a few days to do right (or at least try to). If we all knew who the true experts were that considered all these things in the first place, and all the options out there...than I wouldn't need to do this!

Thanks again everyone.