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Guest
Guest
Whole life policies that are showing increasing premiums are typically policies that were designed with part whole life and part term insurance. The concept was that projected dividends would purchase paid up additions and replace the term insurance. The problem began when dividend projections were less than projected, therefor causing the policy to pay higher and higher costs for the term portion. This problem snowballs and eventually requires the policyholder to pay higher premiums. When one runs into an older WL policy with a term blend, in the majority of cases the policyholder is unaware of the potential time bomb they own.
It must still be a popular strategy. MassMutual recently brought out their Legacy 100 that has a LISR rider for term. Here is the description.
Legacy 100 Whole Life: Legacy 100 Whole Life is a permanent life insurance policy providing a guaranteed face amount. Premiums are payable to age 100. The duration of premiums for riders varies according to the terms of the rider. The policy provides for cash value accumulation and for the payment of dividends as may be determined by the Company.
Life Insurance
Supplement Rider
(LISR)
This rider provides additional life insurance coverage and premium flexibility. The death benefit is level, referred to as the Target Face Amount (TFA), and is selected by the policyowner at the time of application. The TFA is comprised of one-year term insurance and paid-up additions. Every year, rider premiums, less a premium expense charge and any applicable modal charges, and policy dividendsare used to purchase one-year term insurance, paid-up insurance additions or a combination of both to equal the TFA. The premium expense charge is currently equal to 8%of any rider premium, and is guaranteed not to exceed 10% of any rider premium paid in future years. The mix of term insurance and paid-up additions in the TFA changes each year. It is anticipated, but not guaranteed, that over time the amount of term insurance will decrease and the amount of paid-up additions will increase - until the crossover year. The crossover year is the point in time when the paid-up additional insurance death benefit is equal to the TFA and the purchase of one-year term is no longer necessary. The term charge rate schedule for the one-year term insurance coverage is not guaranteed. However, if each rider premium paid is at least equal to the rider's Completion Premium, the current term charge rate schedule will not change. Please refer to the LISR Information page for details and limitations.
