Looking For a Whole Life Policy

[padthaiforlunch]

Hmm. It's only 8 pages for me.

 

[Chuckles21]

Hi Chuckles,

I appreciate that you posted a competing illustration. However, you never re-ran it using a 5% dividend scale like I requested. I suspect if you did, your illustration would never look better than SBLI's. You instead said that it was fairer to use the current scale.

Please explain to me why I would not use the current scale? NML has always paid a higher dividend than SBLI in every single year SBLI has been paying a dividend and it has pretty much always been at least a percent and many times a percent and a half better. So if you want a true comparison of policies they should be run at the current rate.

If you compare the two illustrations, SBLI's "guaranteed" column is always higher than NWML's "guaranteed" column. Running your illustration at a higher dividend scale will of course show better performance after enough years have passed.

Fair point. You are correct that they have a better guaranteed value. This column shows what would happen if there was never a dividend paid to the policy over the entire life on the contract. Dividends are not guaranteed, but NML has paid a dividend every single year since 1872. Pretty sure we will be paying a dividend. Now SBLI has only been paying a dividend for 20 years so I can see how this would be more of a concern with them as the track record is pretty short.

A simple analogy:

I deposit $1 every year into two savings accounts.

With SBLI, at the end of the first year, my guaranteed balance is 1.03. With NWML, my guaranteed balance is 0.73. Each company offers a dividend they can change every year, and you used 6% while SBLI used 5%. Of course after some period of time, the higher percentage will perform better.

You won't get any argument from me here. The better performing policy will outperform the lower performing one. My question is, how is going with the company paying out less a positive thing?

Basically, I am not willing to sacrifice the short term performance hit in order to hold a policy from NWML. I'd rather just not have a WL policy at all. I understand I am in the minority here.

But you have a whole life policy?

I also understand that NWML is like Bank of America, while SBLI is like a small local bank, when you compare their overall size and history. However, due to the guaranteed performance being so much better with SBLI, that was my deciding factor. A big comfort is if life throws me a curve ball, I can surrender the SBLI policy as soon as at the end of year one, pay taxes on the gains, and not lose all my principal - as long as SBLI itself doesn't go under.

Again, fair enough. Good luck with your policy. I was serious though if you want to 1035 the cash value over in a few years, I think it would be the best of both worlds. Get the higher cash value off the bat and then roll it over into a policy that performs better long term. The only hitch would be your insurability, but you seem to be in pretty good health.

Appreciate the time and knowledge everyone shared.

Good luck with everything.

 

[VolAgent]

Chuckles, stuff like this is why many people hate insurance agents. Just let it go, he bought from SBLI, whether you agree with it or not. Continuing to drag this out isn't going to change his mind. In fact, it will only reinforce his decision to go with SBLI over NWM. All you can do is further lower his opinion of you, your company and our profession.

 

[dgoldenz]

Chuckles, stuff like this is why many people hate insurance agents. Just let it go, he bought from SBLI, whether you agree with it or not. Continuing to drag this out isn't going to change his mind. In fact, it will only reinforce his decision to go with SBLI over NWM. All you can do is further lower his opinion of you, your company and our profession.

x2.

 

[tim01]

So if 10 years later Steve decides to do a 1035 exchange, will he need to re-do a medical exam? What if his health changed from his current preferred plus to standard? It probably won't be worth it to change.

 

[Chuckles21]

So if 10 years later Steve decides to do a 1035 exchange, will he need to re-do a medical exam? What if his health changed from his current preferred plus to standard? It probably won't be worth it to change.

Yes, he would need to go through a new medical exam. Correct on the second part, hence why i said it would be based on his insurability.

 

[LGilmore]

Chuck?

I have to ask you, Do you really think Steve is a prospect?

 

[WinoBlues]

Don't show them what they want. Show them what you want to sell.

1 track Jack.

 

[stevew7]

Fair point. You are correct that they have a better guaranteed value. This column shows what would happen if there was never a dividend paid to the policy over the entire life on the contract. Dividends are not guaranteed, but NML has paid a dividend every single year since 1872.

Chuckles,

I'm a little surprised you are not understanding my concern. Did you think, a few years ago, that Lehman Brothers would be bankrupt? I don't care how long NWML has been in business. Lehman was founded in 1850 and had revenue of 19.2 billion before going bankrupt in 2008.

If NWML would guarantee to me that all future dividend payments would be higher than SBLI's, then yes, you are right, the long term decision would be a little harder. But since you can't, trying to forecast one company's future dividends against another makes no sense to me.

You won't get any argument from me here. The better performing policy will outperform the lower performing one. My question is, how is going with the company paying out less a positive thing?

You missed the most important first part. My deposit of $1 with NWML is only guaranteed to be 0.73 and non-guaranteed to be 0.82 my first year. I'd have a loss of 18-27% with your policy my first year.

Permanent life insurance is expensive. $16k in annual premium is a lot of money. Maybe you are lucky enough to work with clients where that isn't a lot of money. But to me, to have a loss for the first five years (on a non-guaranteed basis) or 15 years on a guaranteed basis is unacceptable. So I was going to walk away and just buy term and invest the difference. But I found SBLI's WL policy which I ended up buying because it didn't have this terrible early performance.

Wouldn't you prefer to have the flexibility to walk away from your WL policy in the first 5-10 years, take the cash value, and have to pay taxes on gains, instead of having to take a loss? I am not confident life won't throw me a curve ball - what happens if I lose my job and can't find another? What happens if my kid gets sick? I can surrender my policy, take my capital and dividends, and walk away. If I did the same with a NWML policy in the early years, I'll have fewer dollars than I paid in.

I'm a little confused by your 1035 suggestion - so my SBLI policy is performing as expected (say 5% in dividends). Let's assume NWML has been paying 6% in dividends, more than SBLI. Why would I 1035 to NWML? I'd have to suffer the early performance penalty with NWML, just as if I bought a policy from you today, wouldn't I (ie, the first year loss of 18-27% of my CV)? That'd be worse - I'd be giving NWML dollars that had a positive IRR of around 5% with SBLI in order to take a 18-27% loss my first year?

Or does NWML treat money coming in from a 1035 differently than a customer that has been paying premiums annually?

 

[VolAgent]

Steve, if you want to stop arguing with Chuckles, its ok. No one will mind, honest.

However, I do appreciate you continuing to let him pound away. Your responses are quite informative as it seems to be a straight and honest explanation of one consumer's thoughts and concerns. It is helpful to better understand how people feel on these products so we can better convey their pros and cons. So again, thank you.