Looking For a Whole Life Policy

[dgoldenz]

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 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?

Hey, consumer proof that people who actually understand what they're buying prefer guarantees instead of "trust me"...who would've guessed? I prefer guarantees too....hence my dislike for IUL.

 

[MGAlady]

Wow. I'm surprised noone had any issue on using Life Insurance as an "investment tool." SBLI has a lot of hidden penalties, so careful on removing money, as you don't want to ruin the integrity of the product. Remember, a product can perform how it is supposed to when one doesn't touch it, but when adding and removing funds, insurance products, used as investment tools, have a tendency to not perform the way they should and all of a sudden that NON-GUARANTEED column was something you should have looked closer at.

Steve, congrats on getting coverage, that is the most important thing! Don't forget to get coverage on your wife!

 

[dgoldenz]

Wow. I'm surprised noone had any issue on using Life Insurance as an "investment tool." SBLI has a lot of hidden penalties, so careful on removing money, as you don't want to ruin the integrity of the product. Remember, a product can perform how it is supposed to when one doesn't touch it, but when adding and removing funds, insurance products, used as investment tools, have a tendency to not perform the way they should and all of a sudden that NON-GUARANTEED column was something you should have looked closer at.

Steve, congrats on getting coverage, that is the most important thing! Don't forget to get coverage on your wife!

What hidden penalties does SBLI have?

 

[Chuckles21]

Steve,

You make some very good points that I partially agree with. Don't take these comments as argumentative, just informative.

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.

How did NML fair during 2009? We were the only insurance company to have all 4 independent rating agencies give us their highest financial strength ratings with stable outlooks. Let me repeat that, the only insurance company. SBLI is only rated by one of those companies and they don't give it their highest rating either.

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.

Although history doesn't tell all about the future it can be a guide. There is also no guarantee that SBLI will pay their projected dividend.

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.

Everything you say here is true. If that is your main concern than you made the correct choice. In your very first post you said this was for long term so that is how I took it. One thing I will say here is that NML's policy gives you some different flexibility that you are not thinking about. If you do have something happen and can't pay the premium with SBLI you have limited options. More than likely you would have to surrender it as you said, not entirely bad as you will have a gain. The other end to that is that you loose the death benefit though. Say you loose your job, cancel the policy and are happy because you got some gains and then die the next day. Now all of a sudden this scenario doesn't look so good for your family.

With the policy I showed you for NML $12,300 was over funded additions to the policy. What that means is that if you have a hardship you could stop putting in that $12,300 and only have to pay the actual premium of roughly $2,600 to keep the policy in force. (and even if you couldn't afford that the dividends could cover it so you would have $0 out of pocket) This way you don't loose the death benefit, after all it is life insurance, and you can always pick up overfunding the policy in a few years once things improve and still use it as a retirement asset. With SBLI this is not an option. These are the things many people do not think about, but do happen.

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?

1035 dollars are treated differently as they are not "premiums" per say. Those dollars don't take that hit as you are thinking... just a thought.

Honestly, congratulations on researching and getting a policy in place. What you have is not bad and I apologize if I came across as harsh. I'm just a competitive person and wish you the best.

 

[LGilmore]

Steve?

One quick thing for you as well.... I was fine with your logic right up with the mention of SL and their bankruptcy in comparsion to NWM and their ability to pay dividends and going only with guaranteed values... Now you sound smart stupid.

Why? because what good is any guaranteed schedule if the company goes out of business? If the economy was in such a state that a NWM, NYL, Guardian were to fail, to close up shop, your choice of SBLI would be long gone or are they special in their 20 years?

I was fine with your points up to that one, as you assume or imply that companies who survived some of the worst times in our history, would now fail before the company you chose. Is that logical?

Shearson was/is a different animal subject to different regs and oversight.

Ya lost me there Steve, you've come across as a guy who did the research and then you make a pull it out of your backside statement that just makes you look like a smart dumbguy.

Good luck man.

 

[dgoldenz]

Steve?

One quick thing for you as well.... I was fine with your logic right up with the mention of SL and their bankruptcy in comparsion to NWM and their ability to pay dividends and going only with guaranteed values... Now you sound smart stupid.

Why? because what good is any guaranteed schedule if the company goes out of business? If the economy was in such a state that a NWM, NYL, Guardian were to fail, to close up shop, your choice of SBLI would be long gone or are they special in their 20 years?

I was fine with your points up to that one, as you assume or imply that companies who survived some of the worst times in our history, would now fail before the company you chose. Is that logical?

Shearson was/is a different animal subject to different regs and oversight.

Ya lost me there Steve, you've come across as a guy who did the research and then you make a pull it out of your backside statement that just makes you look like a smart dumbguy.

Good luck man.

If they went bankrupt and another company bought the business they would be required to honor the contract as written, which includes the guarantees.

 

[Larry Tew]

I have been away for a day or three. Nice to see Ned "Chumples" Ryerson still bleeding the Milwaukee koolaid from every orifice.

 

[LGilmore]

"If they went bankrupt and another company bought the business they would be required to honor the contract as written, which includes the guarantees. "

Do you REALLY see a situation where NWM would go out of business and SBLI wouldn't? That was my point.

Yea, I understand guarantee association and all that, but paint a senario where the oldest biggest insurers fail.... would the littler guys still be around or unfazed?

No logic to thinking a big old guy is going to drop in this industry and the little guys are going to survive.

There has to be somebody around to buy the business doesn't there?

Understand I am not drinking anybody's kool aid, but the insurance industry is quite a bit different than banking or investment industry. Playing the "what if" game sometimes just doesn't make sense.

 

[dgoldenz]

"If they went bankrupt and another company bought the business they would be required to honor the contract as written, which includes the guarantees. "

Do you REALLY see a situation where NWM would go out of business and SBLI wouldn't? That was my point.

Yea, I understand guarantee association and all that, but paint a senario where the oldest biggest insurers fail.... would the littler guys still be around or unfazed?

No logic to thinking a big old guy is going to drop in this industry and the little guys are going to survive.

There has to be somebody around to buy the business doesn't there?

Understand I am not drinking anybody's kool aid, but the insurance industry is quite a bit different than banking or investment industry. Playing the "what if" game sometimes just doesn't make sense.

Where did I say NWM would go bankrupt and SBLI wouldn't? He bought an SBLI policy, so I said that if SBLI went bankrupt and another company bought their in-force business, the new owner would be required to honor the guarantees in the contract.

Also, anything is possible, but that's beside the point.

 

[Chuckles21]

I have been away for a day or three. Nice to see Ned "Chumples" Ryerson still bleeding the Milwaukee koolaid from every orifice.

Larry,

Nice to see you still adding nothing to the discussion. Good post by the way.