Looking For a Whole Life Policy

[Chuckles21]

Here is an illustration for you.

I used IUL with a 6.5% rate.

Not knowing more about your specific needs; I just ran a 20 pay scenario with you taking distributions from 70-100...

You could take distributions whenever you wanted (you could take college $, and then wait and take retirement $..), I was just showing an example; and you could do a 10pay 20pay whatever you wanted...


What you need to really look at is the distribution phase.
Look at the DB in relation to the distributions.
Even though you end up taking $1.2mill from the policy (and you only put in $240k); the DB never goes below $500K (it starts at $320K)

The amount in the DB column is what your family gets, thats taking the CV into consideration (and the distributions during the income phase)


This is why PI is such a powerful income tool.
Its not just about the actual amount of CV, its about how efficient the policy is in paying out distributions; and PI beats any other financial product, especially when you consider the payout to the estate.

scagnt83,

I don't understand how that illustration of the IUL can hold up the way you have it? Now I will be the first to admit that I don't work with IUL's that often/at all but how can he have a loan out of that amount when there is no where near the cash value in the policy to support it. The policy as I see it would collapse in on itself so fast and so early. You cannot cave a loan out on a policy greater than it's death benefit otherwise how is the company supposed to support itself. Please explain.

 

[scagnt83]

Helps a ton, Ty !
What is that iul?
The 3.5% is guArtanteed? And the 6.5% is estimate of mkt return?

Also, why doesnt disability waiver cover full premium if living exps go up? Confused on that statmemt.
Thx

An IUL is an Indexed Universal Life. It has a fixed account which receives a current interest rate (that is the 3.5%, its not guaranteed and it fluctuates from year to year, its currently very low with LFG, but has been competitive not too long ago);
It also has an Indexed account that receives the better of: the S&P 500 gain for a term of one year, up to a specified cap (11.5%); or if the index is even or negative, you get the guaranteed rate of 1%.

So basically you will receive anywhere from 1%, up to the specified yearly cap, which is currently 11.5%, depending on any indexed gains for that yearly term.

I used Lincoln Financial.

Penn Mutual has a good product too, but my illustration software for them is currently out of date.
Penn has a 2% guaranteed indexed rate, and currently has a 5.25% fixed rate.


The 6.5% is an estimated market related interest crediting rate based upon the indexing method.

6.5% is a very realistic average imo based upon a 40 year historical.


Universal Life is very similar to WL; the main differences are that it receives an Insurance Company determined interest rate that is stated at the beginning of every year (kind of how a mutual company declares their dividend for the year).
Another main difference is that WL front loads the policy with expenses and cost of insurance and tries to get it out of the way to an extent; UL spreads them out, and has a gradually increasing COI.
Some say the expenses make the policy unattractive... I would argue that both WL and UL have their uses and specific situational fits. I sell both and own both.

Another difference that imo helps UL/IUL with CV distribution is the ability to use GPT testing on the policy. This is getting very technical and is a topic that we have actually been discussing in another thread about ULs.... its not really anything for the consumer to get caught up in...... its kind of like a car owner wanting a mechanic to explain the exact workings of one gear box vs. another


I wasnt exactly clear about the disability rider.

I am assuming that you have adequate income replacement insurance in the event of a disability.... aka: Disability Insurance.

Some people think that if they have Disability Insurance that they can just use the benefits from that to fund their PI policy.... the problem is that disabilities often bring increased expenses which can eat into available premiums.

If you have a high risk job, then you might get a nonstandard rating because of higher risk of injury, this would make it more expensive; but imo if you can qualify for the DI rider, then you should take it.

 

[Chuckles21]

scagnt83,

I see you just ignored my question. Again I ask how that illustration you showed makes any sense. Mathematically it is all messed up and there is no way it could play out as illustrated. Please explain how you can be taking out $40,000 a year and rack up a loan of that amount when there is no where near that cash value inside the policy. A life insurance policy is not a bank in the sense that they will not just lend out money without some actual financial backing or collateral, i.e. cash value. Unless you have a legitimate explanation I would call shenanigans.

Take his age 83. You show him still taking out $40,000 plus there is a loan interest that year alone of $56,265 yet somehow his illustrated cash value rises????? There is no sense to it.

 

[scagnt83]

scagnt83,

I see you just ignored my question. Again I ask how that illustration you showed makes any sense. Mathematically it is all messed up and there is no way it could play out as illustrated. Please explain how you can be taking out $40,000 a year and rack up a loan of that amount when there is no where near that cash value inside the policy. A life insurance policy is not a bank in the sense that they will not just lend out money without some actual financial backing or collateral, i.e. cash value. Unless you have a legitimate explanation I would call shenanigans.

Take his age 83. You show him still taking out $40,000 plus there is a loan interest that year alone of $56,265 yet somehow his illustrated cash value rises????? There is no sense to it.

Not ignoring... just have a life outside of this forum, and had already spent a good amount of time responding to the other question.

Patience is a virtue.

 

[Franz Kafka]

scagnt83,

I see you just ignored my question. Again I ask how that illustration you showed makes any sense. Mathematically it is all messed up and there is no way it could play out as illustrated. Please explain how you can be taking out $40,000 a year and rack up a loan of that amount when there is no where near that cash value inside the policy. A life insurance policy is not a bank in the sense that they will not just lend out money without some actual financial backing or collateral, i.e. cash value. Unless you have a legitimate explanation I would call shenanigans.

Take his age 83. You show him still taking out $40,000 plus there is a loan interest that year alone of $56,265 yet somehow his illustrated cash value rises????? There is no sense to it.

Have you ever sold a permanent life insurance?

 

[Chuckles21]

Have you ever sold a permanent life insurance?

Have you? Not sure if you actually looked at the illustration but how is it possible to have decreasing cash values for 18 straight years and then magically have itself turn around and start increasing. All this with a loan that is going up in debt and interest. I don't think myself to know everything, but I do know that unless I get an explanation the #'s don't hold up.
- - - - - - - - - - - - - - - - - -

Not ignoring... just have a life outside of this forum, and had already spent a good amount of time responding to the other question.

Patience is a virtue.

Sounds good, am just interested in your explanation.

 

[scagnt83]

I ask how that illustration you showed makes any sense. Mathematically it is all messed up and there is no way it could play out as illustrated. Please explain how you can be taking out $40,000 a year and rack up a loan of that amount when there is no where near that cash value inside the policy. A life insurance policy is not a bank in the sense that they will not just lend out money without some actual financial backing or collateral, i.e. cash value. Unless you have a legitimate explanation I would call shenanigans.

Take his age 83. You show him still taking out $40,000 plus there is a loan interest that year alone of $56,265 yet somehow his illustrated cash value rises????? There is no sense to it.

OK, first of all, there are no "shenanigans" involved with that illustration.
I used illustration software provided directly from LFG and that has been updated within the past week, and just now.

The reason you were asked if you have ever sold PI is that your questions are ones of someone who is not educated on the product.
(Im not bashing you for that, everyone has to start somewhere; but I would be more diplomatic in your questions/statements on subjects that you are not educated on)

The multi-million dollar illustration software thats developed by the multi-billion dollar IC has the algorithims built in it to calculate how the loan is carried within the policy; if the software is showing it, its correct.
When a policy is over-loaned or over-withdrawn the software will not show the values moving forward, it will show them stopping.

So the short answer is that the software is a hell of a lot smarter than any one agent; if it shows it, it is accurate.
And if you ever have any doubts you can always call an inside sales rep at the company and have them double check.


Now, to give you the mechanics of it.
You are correct in your statement that there has to be adequate value backing that loan.
You are incorrect in assuming that the illustration did not have adequate backing.

You actually had no proof to base that assumption on (without replicating the illustration on your own software) without seeing what the Gross Policy Value was. The illustration you saw only shows the Net Policy Value (aka: CV or SV).


Instead of me typing a 30 minute post; I will just illustrate it for you.
(I commend you on actually being willing to look at illustrations and trying to learn from them; very few around here actually look at illustrations when they are posted.... but they will type 50 posts about the subject...)


I have attached the Policy Expense Report. It shows the Gross Policy Value (under the expense analysis its just referred to as Policy Value).

I actually usually use the Expense Report to educate most clients from; I dont shy from it like most agents.

Its important to remember that the loan interest is only 5%, I am receiving 6.5% on 80% of the policy; of course that is going to more than just the loan, but what it does is help sustain the loan.
Also, the loaned values are still receiving that credited interest rate; so the credited gains are not just from the CV/SV.


I would recommend reading the "Understanding Your Illustration" section of the pdf I have attached.

Then look at page 8, the "Policy Expense Analysis".

You have a "Policy Value", then you have a loaned value, along with your surrender charges and Surrender Value.

Go to age 80 in the Expense Analysis.
- You have a Policy Value of $1.4mill, a total Loan of $800k, and a Surrender Value of $600K (I am rounding to whole numbers)

As you can see, the loan is not more than the Policy Value.

The interest shown, is just the amount of the Loan that is interest.


The reason that the CV rises in some later years, and falls in others is because of the COI. As you can see, it varies in older age and some years are cheaper than others, while on average it increases, and increases most years; it does not always increase, and sometimes decreases.


If you compare this illustration to the last one, you will see that the CV is higher and the Distributions are higher as well.

This is because I had it set to pay annually, and take Distributions monthly. This is the most efficient way to use the policy for CV use for obvious reasons.

 

[stevew7]

If you are still around this forum I would advise you to tread very cautiously with this company. Looking at SBLI of MA they have only even been around since 1991 and are a stock company at that. I personally would suggest going with a company with an actual long range track record and that is mutual. I personally am an agent with Northwestern Mutual and would be glad to at least show you what it is we can offer. You said it yourself in the beginning, our policies IRR history is impressive and although it doesn't guarantee anything in the future it does tell us something.

Hi Chuckles21,

Had my paramed and am waiting the underwriting results from SBLI and so only check the forums weekly or so now.

If NWML has a better option, would you be willing to run an illustration and attach to the forum so everyone can compare? That would allow many people (including myself) to compare it to SBLI's illustration, which I posted earlier in this thread (post #86 in this thread). I have 30 days to cancel the policy, so I can always change my mind if you present a better option.

SBLI of MA has been around since 1907 (according to the marketing slick I got), not 1991. It is definitely smaller than NWML, but has a good A+ AmBest rating.

 

[Chuckles21]

Hi Chuckles21,

Had my paramed and am waiting the underwriting results from SBLI and so only check the forums weekly or so now.

If NWML has a better option, would you be willing to run an illustration and attach to the forum so everyone can compare? That would allow many people (including myself) to compare it to SBLI's illustration, which I posted earlier in this thread (post #86 in this thread). I have 30 days to cancel the policy, so I can always change my mind if you present a better option.

SBLI of MA has been around since 1907 (according to the marketing slick I got), not 1991. It is definitely smaller than NWML, but has a good A+ AmBest rating.

Stevew7,

I looked into it further and you are correct the company itself has been around since 1907, but in 1992, one year off, it seems this happened. (taken from their website)

"In 1992, legislation took effect that reorganized SBLI into a closely held Massachusetts life insurance company, while still preserving its mission of safe, low-cost life insurance. This legislation gave SBLI the same powers as other Massachusetts insurers and thus opened up geographic and distribution sales channels."

So both of us were correct to a degree. I've included an NML proposed illustration for comparison. Short term you are better off with SBLI, but long term it isn't a comparison. What I have done is greatly overfund a policy for 10 years and then take it paid up. This is essentially what a 10 pay policy is.

So let's take a few projection snap shots for comparison:
Policy Year 10: SBLI: DB - $839,210 CV - $219,050 (Much Better)
NML: DB - $750,000 CV - $186,971

Policy Year 20: SBLI: DB - $946,741 CV - $345,343 (Slightly Better)
NML: DB - $889,406 CV - $324,428

Policy Year 30: SBLI: DB - $1,076,450 CV - $533,467
NML: DB - $1,139,832 CV - $564,877 (Slightly Better)

Policy Year 40: SBLI: DB - $1,249,176 CV - $800,484
NML: DB - $1,500,857 CV - $961,764 (Better)

Policy Year 50: SBLI: DB - $1,467,687 CV - $1,148,069
NML: DB - $2,010,668 CV - $1,572,804 (Way Better)

So here is how I see it. SBLI entices you in with higher cash values in the short term, but lower value long term. Most people don't take out life insurance for the short term value, they see it as a long term asset and want it's long term performance to reflect that. Tell me what your thoughts are but long term there is no comparison.

 

[scagnt83]

Did I just miss it, or did that NWM illustration not disclose the dividend rate anywhere on there?

8% is an expensive loan...