Whole Life with Massmutual Good Idea?

[LGilmore]

"Thank you Lgilmore for your frankness. I was feeling a little underwhelmed by my agents explanations on certain points. Maybe there just isn't that much there? Though I can't help but feel like I'm missing something. Diverse opinions seem like a good thing to me, more to consider. "​

Sailerdude,​

You can make this as complicated as you wish or as simple as you wish, the thing is both ways get you to exactly the same thing. Same plan. ​

This may be the engineer part of you I was mentioning, the desire to make it harder than it is. ​

I love to brew my own beer. I'm pretty good at it. I know if I use the right amount of grains, hops and yeast I will come up with a great beer after it's aged. Now there are other brewers who can tell you the difference between fermenting at 68 degrees vs. 69 degrees and what it does to the beer. Does it actually make the beer better? Nope, not at all. Just makes fewer people want to listen to you. I pay attention to the things that matter in the making of the beer. The other stuff, well nice to know, but not necessary to make good beer. (Next reply, let me tell you about "Oaking your beer and what it does to a well hopped ale and your pallet" )​

Whole life can be as complex as you want it to be. For some people they need the complexity because WL is a pretty boring product that does a lot of things well. Nobody brags about buying stability. They should, but where's the excitement in that? ​

Good luck, I know I must frustrate you because I don't want to explain why the number three places to the right of the decimal is 6 and not 5. It isn't that I don't know, it's just that it's not really that important when it comes down to it. ​

You're looking at a good company, a good product and would this be a major F up in your life if you bought it? Nope. You'll end up just fine. ​

Let me add, about the only thing you're doing wrong is not buying from me.. But I'm not licensed where you live. cheers.

 

[JeffM]

Thanks for the responses.

I'm kind of on the fence about term insurance. I already have two times my salary through work. I guess what I was thinking was that whole life could be used not only for life insurance, but also as a place to save money. I have a 401k that is pretty well funded, so I'm not really looking to get into more stocks at the moment.

As for health, I don't smoke, and don't have any health problems that I'm aware of. How does health play into this?

Thank you Lgilmore for your frankness. I was feeling a little underwhelmed by my agents explanations on certain points. Maybe there just isn't that much there? Though I can't help but feel like I'm missing something. Diverse opinions seem like a good thing to me, more to consider.

JeffM, if it takes so long to build cash value, why would term insurance be a good idea? And what does excellent conversion privileges mean? I know I can probably ask my agent, in fact I already did. I was just wondering if I could get a faster answer.

BNTRS, I'm confused on what the difference between a paid up addition and the additional life insurance rider is. Is that the overfunding part? I'm also a little confused on the catch up provision. Does this mean I can't change the amount I put in? What is blending?

Haven't you been shown a whole life illustration specific to your needs? If not, you need to have your agent do so and go over it with you in detail. All your questions will then be answered.

There are surrender charges for cancellation in the early years, which generally wipes out any cash value that would be returned to the policyholder. I have known many cases where someone was talked into buying whole life where the premiums were not affordable from a cash flow standpoint, or some economic disaster happened, and the person cancelled the policy in the early years. He winds up with no cash from the policy, but has paid many times more premium than a term policy with the same death benefit. Thisd is what I was referring to.

Excellent conversion is my jargon and means that there are many MML cash-value products one can convert to. It is automatic, can be done piecemeal (I have clients who buy a MML term policy and convert 10% a year to cash-value, as it becomes affordable for them to do so), with no underwriting. paperwork is minimal.

 

[Sailerdude78]

Volagent,

My wife already works. Her income is decent and she'd probably be ok without me. I do realize that I need more insurance, that's why I'm looking at life insurance. I've looked around at a few other places, and even my agent threw out the 10x income advice. This has me wondering, what's the logic behind that? Seems everyone wants me to have 10x my income.



I'm starting to get a tad nervous. On the one hand there seems to be an opinion that it'll be find just go with it, and Massmutual is a good enough company to make sure everything is ok. One the other I'm hearing careful, you could lose money. But the "I've seen people lose money" that JeffM is talking about is making me nervous. My agent gave me a few stacks of paper that had a bunch of numbers on them, that I've looked through, and just looked through again, I don't see any "surrender charges" and there doesn't appear to be any mention of them anywhere. Is this not the right thing? Or could it be the case that this policy doesn't have any?

 

[VolAgent]

Volagent,

My wife already works. Her income is decent and she'd probably be ok without me. I do realize that I need more insurance, that's why I'm looking at life insurance. I've looked around at a few other places, and even my agent threw out the 10x income advice. This has me wondering, what's the logic behind that? Seems everyone wants me to have 10x my income.



I'm starting to get a tad nervous. On the one hand there seems to be an opinion that it'll be find just go with it, and Massmutual is a good enough company to make sure everything is ok. One the other I'm hearing careful, you could lose money. But the "I've seen people lose money" that JeffM is talking about is making me nervous. My agent gave me a few stacks of paper that had a bunch of numbers on them, that I've looked through, and just looked through again, I don't see any "surrender charges" and there doesn't appear to be any mention of them anywhere. Is this not the right thing? Or could it be the case that this policy doesn't have any?

10x income is an easy number to compute and it isn't so large most people can't comprehend it. Really, you need a financial needs analysis to determine the exact amount of life insurance needed. But if you're not going to do it, 10x is a good starting point. In your 30s, most companies will easily let you have 20 - 30 times income. So even then, you are no where near maximum human life value (to oversimplify, what your income potential is over your working lifespan).

About the only way you will lose money with a whole life policy is if you surrender it or lapse it while the cash value hasn't had a chance to build up to be more than the premiums. That is the point of the extra premium, it gets it positive that much quicker.

Life insurance is a front loaded contract. They move all the expenses into the first few years. After that, there is a little ongoing expense for the insurance risk, but everything else is available for cash value. Now with whole life, these figures are a black box, you just see what happens to the cash value and not how it was all done.

Again, I still say make sure you end up with at least 10x income. Even if she has a decent job, I bet you are living off both your incomes and she will still suffer without yours. The same applies to her, make sure she has 10x income on her as well. Also, make sure your disability income is up to snuff. You probably have it through work, and those don't always have the best definition of what disabled is. Mass Mutual has a pretty good DI (disability income) contract. Have your agent look into that for you. He may not be an expert on it, but I bet there is someone in his office who is that can help him.

 

[LGilmore]

"I'm starting to get a tad nervous. On the one hand there seems to be an opinion that it'll be find just go with it, and Massmutual is a good enough company to make sure everything is ok."

I warned you in my first post. You are going to get opinions that are wildly different based on experiences, product availability, who they learned from.


" One the other I'm hearing careful, you could lose money. But the "I've seen people lose money" that JeffM is talking about is making me nervous."

Anything's possible, but if you go back and look at Jeff's statement, the losses occurred from outside factors and possibly overbuying. Heck, I can sell you a security that can lose value even while you work, pay into it faithfully and do everything right. RISK is a mean 4 letter word. My point about boring vs. excitement is the amount of risk you take on purchasing WL vs. something else. For your WL to fail you, something else has to happen to the premium stream (and only early on in the policy life), an investment can fail you even if you contribute the entire time. WL is boring because chosing the right grouping of companies your risk is almost nothing.

" My agent gave me a few stacks of paper that had a bunch of numbers on them, that I've looked through, and just looked through again, I don't see any "surrender charges" and there doesn't appear to be any mention of them anywhere. Is this not the right thing? Or could it be the case that this policy doesn't have any? "

Dividend paying WLs don't have surrender charges. The cash value is the cash value. If you bag the policy, you get the cash value on that day of "baggage". If it's a lot or a little depends on when you decide to bag it. WL like Vol says is front loaded. It is a slow grower for that reason. A way around that is using the option to put more cash into the policy through a paid up addtion rider. (note: probably a unlimited amount of names for this feature.) The PUA rider (the name I learned from 24 years ago) allows you to supercharge your cash values by bypassing almost all costs of putting money into the policy. PUA boost your dividends and death benefit and make the policy grow faster.

This is where when looking at the choices you have, you decide how you want this policy to work. If you choose PUA cash value route, take a smaller face and fill that puppy up. (right now is where the term MEC will come into play. Your agent should be able to explain it. I can but I need to get to work today.)

There are some excellent posts on the nuts and bolts of this method, search for them. It will provide a good, better written version than I can provide for you.

And Vol has made some good points to you about different coverages and levels. Give those some thoughts. Do you have to do what any of us say? Nope. but give thought to what has been said. I don't see the problems Jeff has mentioned, doesn't mean they're not true. They haven't happened to my clients. (note: any cash value policy should have waiver of premium attached to it.)

I've owned WL policies for 24 years and from personal experience they kick a ss. Owned it before then and was talked out of it and regretted that decision ever since I came into this business and learned about insurance. ​

 

[BNTRS]

BNTRS, I'm confused on what the difference between a paid up addition and the additional life insurance rider is. Is that the overfunding part? I'm also a little confused on the catch up provision. Does this mean I can't change the amount I put in? What is blending?

Sorry this happens because everybody wants to call this something different. The Paid-up Additions rider and the Additional Life Insurance rider are the same thing. I'll refer to it as PUA because I, like others here, were first exposed to this as the PUA rider and that's what we call it. Yes this is the over funding part. A little details on PUA's.

PUA's are immediately paid up life policies that have a cash value equal to the amount of money put into them and a death benefit that is a multiple of the that money put in (e.g. hypothetically you put $1 in so you have a PUA with a value of $1 and a death benefit of $3). It's immediately paid up so there is no further premium required. Now, what makes them special is that they earn dividends. And those dividends can purchase additional PUA's (think reinvesting dividends on a mutual fund for the compounded growth aspect mathematically very similar in nature).

So what you're doing is giving the insurance company more money than you need to. For that, they are giving you immediate cash surrender value and more death benefit, plus paying dividends because that increased death benefit means increased ownership in the company (mutual companies vest ownership in policy holders).

The details about Massmutua's PUA rider make it somewhat rigid. Let's use some hypothetical numbers for an example:

Let's say at issue the PUA rider is $1,000/year, meaning you're going to give Massmutual $1,000 more each year than you have to. Mass will let you increase this amount by 3% every year (that's the maximum increase). So the following year, you can put a total of $1,030 into the policy. You can also skip the extra $30 and just put $1,000.

The following year you'd be able to put a maximum of ~$1,061 (it actually comes out to $1,060.9 when I use a simple calculator). Again you are free to simply put the $1,000 in.

The following year you could put a maximum of ~$1,093 into the policy. Now this is an important year. You're free to put just $1,000 into the policy, but if you do just $1,000 you'll start over at a maximum of $1030 in the following year. If instead you put in the maximum of $1,093, then the maximum the following year will be ~$1,126.

You can also put a minimum of $300 in. Each year, even though you chose $1,000. At the end of the 3 years, you need to make up the difference between what you put in and what your $1,000/year plus the increase would be, or else you'll fall to a maximum allowed of what you put in (e.g. lets say it was $300 per year for 3 years which is $900. You need to place $2,100 to keep the $1,000/year PUA rider maximum or else you'll fall to $300 per year).

Now, I'll predict the next question which is what happens if you don't put in at least $300. The rider terminates and you are no longer able to overfund.

The original point behind my bringing this up was to point out that I find people are turned off by this, and are happy to look at contracts with more flexible provisions (i.e. have a min and max with a much broader range that is no subject to level funding to the keep the maximum up say $100 min per year and a max of a few thousand no need to catch up if they skip a year, they just dump in varying amounts as their finances allow). Though I will tell you, that while people tend to dislike the rigidity, most keep their funding of these products pretty rigid (i.e. I haven't seen too many clients reduce or stop funding the PUA rider in a way that would have caused serious problems under Mass' provisions).




Blending is another topic in an of itself. It's the practice of adding a term rider to the policy to increase the death benefit. This has two goals.

1. Increase the death benefit at a lower cost to you since it's term insurance

2. Increase the Modified Endowment Contract limit so you can stuff more PUA's into the policy. <---Very helpful

Blended 10 Pays (and Mass has a 10 Pay) can be very attractive cash value wise. I used to say nothing beat Guardian's blended 10 Pay. It's a very competitive product, but I've backed off that statement a tad in recent years as some other companies have gotten very good at competing. If you search the forum, you'll probably find my statements on this.



I also want to take a moment and echo the whole life does not have a surrender charge statement. This is true. There are some very real expenses in the very beginning of a whole life contract. It does make sense to know what you're doing. If you feel like what your agent is telling you is a little suspect. You can certainly share with us and we'll assist in sorting out fact from fiction.

As an Engineer, your going to ask a lot of questions, and probably burn yourself out a bit on this decision. Sometimes ask questions just for the sake of asking a question. I'm not trying to beat you up, I'm more trying to say it's ok, we understand.

Also, as a very shameless plug. I'll call your attention to the insurance pro blog. I'll give you full disclosure in pointing out this resource is owned and maintained by me.

A few posts that may be of particular interest:

Paid-Up Additions

Blending

Cash Value Life Insurance As An Asset Class

Cash Value Life Insurance as a Retirement Vehicle


Ok, I feel dirty plugging myself so much, so I'm done.

 

[Larry Tew]

These "conscientious consumer" threads all share one thing. The OP doesn't trust their agent as far as he / she can throw them and comes here for validation from agents who they have never even been in the same room with.

They all seem like a Pamela Yellen ghost-write.

 

[BNTRS]

These "conscientious consumer" threads all share one thing. The OP doesn't trust their agent as far as he / she can throw them and comes here for validation from agents who they have never even been in the same room with.

They all seem like a Pamela Yellen ghost-write.

Well in that case, let me say that I highly recommend Bank on Yourself

 

[Larry Tew]

Well in that case, let me say that I highly recommend Bank on Yourself

That's funny. But seriously, if I had a client who felt the need to check and verify every syllable out of my mouth, ESPECIALLY after they understand my position on trust (trust nothing without verification) and I had proved my recommendations every step of the way, I would graciously but firmly tell the client that for the sake of all involved, I'll just step aside so that you can find an agent / advisor they feel better about. No hard feelings... probably just a chemistry thing, good luck.

 

[Sailerdude78]

Thanks again everyone. This is truly extremely helpful.

To give a little more background. I found the book by Nelson Nash, after looking through various finance books on Amazon. I though it sounded interesting and bought it. I read through the first few pages and then skimmed through much of it and was fascinated by the topic. I brought it up in conversation with a co-worker and mentioned that I just needed to find someone who sold insurance who could explain what this was all about. My co-worker recommended I talk to my current agent. He's good guy, but I get the feeling he just doesn't really understand this stuff. He has to be in his late 60's and he's less willing to discuss details than any of you have been.

I really started to question him when he told me Massmutual was going to pay me 7% per year as that was their dividend rate. When I looked through some of the numbers he gave me, I couldn't find anything that looked like a 7% return, and when I asked him about it, he told my I must have been calculating it incorrectly. I know how to do math, so his response kind of irked me.

Volagent, thanks for elaborating on the income need. How do life insurance agents determine the amount of insurance someone like me needs?
I'm still confused about the front loaded stuff. How can the cash not be there to begin with and then suddenly appear later?

Lgilmore, is a MEC a modified endowment contract? I remember some vague conversation with my agent about this, and I do see MEC (modified endowment contract) in the paperwork my agent game me.

BNTRS, thank you. That explanation actually makes sense, and I did check out the other web pages you provided. On one of those web pages, there was something that said whole life got stronger as it gets older, what does that mean? Also, I did some searching around the forum and see that you've been in several discussions about this. I also notice that you've strongly recommended Guardian's 10 Pay. Do you still? How is it different from Massmutual?

Larry Tew, I googled Pam Yellen and found another banking book, does this mean this is a common subject that a lot of people talk about?

I know that a lot of you have told me this is works, but no one has really elaborated on this "banking" thing. How does that work?