You're with Guardian? Small world. I was with Guardian from 1990 to 1998. Bob Ball (Living Balance Sheet) was our Co-General Agent before taking a job with Bob Castiglione (LEAP) and then becoming a consultant to Guardian. I have a good friend who is with Guardian, so we're always comparing notes.Sure, and since a lot of people around here know me as a Guardian hack I'll speak to the recognition of dividends directly.
Outside of presitige value II they are rather expensive in my experience. They do manage to get a lot of premium into their paid up 65 product without MECing, which is potentially nice, but I've seen better illustrated values. And even with Prestige value, for a little more I can get Guardian's 121 product and not have to wait 10 years to start receiving dividends.
I'm not a big fan of non-direct recognition and here's why. First, there's no magical potion owned by any of the insurance companies. If they are going to pay the same dividends for a loaned value as a non loaned value, there some place they have to make this up. The two areas are, policies without loaned values, and a variable interest rate.
Most of the direct recognition companies have fixed rates (Penn Mutual being the only one I can think of that is an exception). Now, if dividend rates drop below the loan interest rate, it's possible a company would pay a higher dividend rate on loaned values because of the spread between dividend rate and loan interest, and Guardian actually does this. The Quiet company not so much, they need your money so they can pay out the highest number of dividends even if that means not paying you the dividends, they have a lot of other policy holders to satify you know.
On the issue of illustrations, an illustrated value doesn't mean much, because it's almost guaranteed to be wrong.
But what happens to my ON policy with it's magical non-direct recognition if I start pulling loans as an income stream and they start increasing the loan interest rate on me? Now I have to worry just the same about how big the loan is getting. I can't name a non-direct company that has a current loan rate below the guaranteed rate on their WL product. For a product built on the notion of guarantees, it sure doesn't make a lot of sense to leave that component (loan interst) flapping in the wind.
I recently looked at ON or a case I was working on that sought to show an income stream coming from the policy in later years. For kicks I ran the ON illustration for this reason. Here's what happened, Guardian not only could maintain the inome stream longer, it maintained higher dividends than Ohio National until the last 5 years of the income stream, which was already past the time Ohio National illustrated being able to take income.
Their waiver rider isn't that excellent (I'll give them credit since they will waive scheduled PUAs).
Their term blend isn't all that flexible.
Their accelerated death benefit rider is pretty standard, but there are better.
Again, great Term rates and a solid UL. In fact I'm planning on taking apps for two term cases tomorrow with them, and plan on making a UL proposal with them to a long time client in a few weeks.
WL, maybe, but probably not.
I understand both sides of the dividend issue, and I understand there are many moving parts. My opinion on direct recognition comes from the fact that the insurance company is already charging loan interest for money to be out of the policy. To then reduce the dividend on top of that is like having a CD at the bank. You borrow from the bank and pay the interest they charge for the loan, and on top of that they reduce the interest rate on the CD. Ultimately, one approach may not be any better than the other, but non-direct just rings truer for me. Ohio National's variable loan rate is tied to a Moody's Bond index and is currently 5.45%. Given a choice of 5.45% and all of the dividend or 8% and part of the dividend, I would prefer the first choice. This works better for me because I promote whole life as an alternate to bank financing for cars and other items usually financed. They key point is to repay the loans just like you would to the financial institution. In this scenario, non-direct seems to work well.
