Whole Life vs. Universal Life

[Franz Kafka]

I seems that every year we would get a dividend survey from all of the majors and NML would be ahead (slightly) of the other carriers (I think then everyone was running 8.6 area and NML 8.8). I can't imagine NML would be lower than mass on par whole life dividend.

You're probably right. I think I was thinking about the 30 year IRR - MM's about 10 basis higher than NM. I checked MM rates for late 90s (probably when you were with NM) and they were mid 8%s.

 

[xrac]

Which is why one of my first contracts was with Mass Mutual. Took a little calling around, but as an indy, they are a great resource.

Pad, we don't agree on politics but we sure DO AGREE on insurance.

 

[retread]

Re: Whole Life -versus- Universal Life

...
I still would have reservations about putting a 60 year old on a term policy, WL would be a better option, albeit there would be a higher premium given the age, than a term which will not have any sort of financial return for either the client or his/her family.

What happens if the client lives past age 80?

At least with a WL product there's both the cash back, some policies will have a return of premium rider on it, as well as the death benefit.

I agree wholeheartedly. I am still waiting for some responses to pros and cons of "Simplified Issue" W/L. Let me add to the quest that I am seeking Simplified Issue as a Blended Product like Dave talks about. I'll take any help I can get. Is this possible, or does Simplified Issue preclude Blended Products?

 

[bluemarlin08]

dividend interest rate of 7.30%.


What are they paying this 7.3% on? I think this is very misleading, these companies are only earning around 5% tops on their conservative investments, this 7.3% appears to many consumers as to what they are earning on their policies, not true.

 

[retread]

dividend interest rate of 7.30%.


What are they paying this 7.3% on? I think this is very misleading, these companies are only earning around 5% tops on their conservative investments, this 7.3% appears to many consumers as to what they are earning on their policies, not true.

Where's Morley Saffer and John Stossel when you need them?

 

[bluemarlin08]

Blended WL products look great until the companies don't make their dividend projections, then more of the premium and dividends have to be used for more term than projected and can lead to increased premiums in the future.
What's Morley's number?

 

[retread]

Blended WL products look great until the companies don't make their dividend projections, then more of the premium and dividends have to be used for more term than projected and can lead to increased premiums in the future.
What's Morley's number?

I love it! That's what I wanted to hear.... and Morley's number is 1-800-60Minutes. NOT!

 

[Dave020]

Blended WL products look great until the companies don't make their dividend projections, then more of the premium and dividends have to be used for more term than projected and can lead to increased premiums in the future.
What's Morley's number?

Um, I don't recall it that way with NML. I used to run a ton of CompLife and ExtraOrdinary Life illustrations back in the day and as I remember it, the base guarantee on the blended was always sufficient to at least maintain the total death benefit. At that time dividend was around 8.8% and base guaranteed column was I believe 3 or 3.5%. You'd end up with something like this:

Blended Plan $20,000 Base $80,000 Term $95/Mo Premium

Age Guaranteed At Current
40 100,000 100,000
50 100,000 125,000
60 100,000 225,000
65 102,500 312,000
100 210,000 750,000

I don't recall ever seeing or running a CompLife or EOL illustration that did not survive the guaranteed base crediting rate intact. I am talking about NML here, so it could be different with another carrier.
- - - - - - - - - - - - - - - - - -

dividend interest rate of 7.30%.


What are they paying this 7.3% on? I think this is very misleading, these companies are only earning around 5% tops on their conservative investments, this 7.3% appears to many consumers as to what they are earning on their policies, not true.

Here is NML's explanation of how dividends are calculated and paid.

"For any policy year, the dividend is equal to the difference between the policy value at the end of that year and the guaranteed cash value at that time. Any paid-up additions in force for the entire policy year are included in determining the policy value and the guaranteed cash value."

It's all broken down here:

NMFN: LC, AL, LI, How We Determine Dividends

Also, NML is 6.5% for 2009.

 

[LGilmore]

"What are they paying this 7.3% on? I think this is very misleading, these companies are only earning around 5% tops on their conservative investments, this 7.3% appears to many consumers as to what they are earning on their policies, not true."

Remember that is not just investment return that drives dividends. It is also ongoing expenses and mortality costs in a given year. You are correct that insurance companies cannot pay a dividend based solely on their investments. But if they do a good job expense wise and have fewer claims than expected, the dividend will be higher than just investment income. Basically the higher dividend is simply coming in under budget.

 

[bluemarlin08]

Perhaps that was true with NWM policies, it wasn't that way with other companies. Of course I am referring to policies I was involved with in the early 80's and the impact all companies experienced with lower dividends into the 90's. I don't write any blended policies currently so perhaps they are structured differently.