10 Pay Vs. L99

[BNTRS]

Death benefits were set to their minimums respectively to allow $25,000 going into the contract for the entire 10 years.

Blending rules are the same for the 10 pay and L99 10:1.

The point about flexibility is fine in theory but problematic in reality. With the amount of cash going into the policy there isn't much in the way of flexibility without producing a MEC. Additionally most WL contracts have limits to the rules concerning PUAs. Guardian's is anything up to 3 times base premium for the first 10 years and 1 times base premium after that with the ability to change up or down within those limits with a minimum of $100 per year; going beyond this requires additional underwriting. Massmutual allows a PUA rider that is fixed at issue and can be increased by (I think I'm remembing this correctly) 5% annually, but if decreased cannot automatically be increased to the original amount with a minimum to keep the rider at 200 or 300 dollars per year. NYLife I don't know, never sold a contract, don't like them very much.

So use L99 and gain, maybe, some flexibility but pay a much higher waiver rider (even if taking a reduce paid up policy at some future date), and leave certain elements flapping in the wind (if dividends perform less favorably and you are trying to offset the premium now you have less cash and a premium to still satisfy

Now even if he wanted to continue paying base premiums into the L99 product after the 10 years, in year 30 he'd have $1,025,844 in projected cash value, looks a little better than the $995,225 projected in the 10 pay, by about $30,000. But note the difference in premium between the two, a little over $38,000 more goes into the L99 contract doing this...so he lost $8,000.

 

[johnyblu]

The waiver rider may be more expensive but is seemingly more beneficial. If something happened in year 5, for a 10pay it'd kick in 5 payments, for the L99 it'd kick in 94 payments. Even though the 10pay premium is higher, if you run each cases the L99 should have have significantly higher CV and DB in later years. For that reason, I'm not sure you can call the PUA rider more expensive as it doesn't seen comparable.

 

[BNTRS]

Ok, I'm a tad confused by the insistence over the waiver rider on L99, but I'm thinking perhaps I've missed something, or there is another consideration you are making but haven't clearly identified it as a true objective. So let's try this approach, comparing and contrasting the two based on what I see as your stated objective, and what I think it might actually be.

Cash Accumulation

If the goal is truly one that seeks cash accumulation based on a large dump in during the early years and limited to no additional cash being placed in the policy, and securing the policy from the risk of not being able to earn income or have money to additionally add to the policy, my recommendation to you would be the 10 pay. It's ability to accumulate cash early and lower expense structure coupled with the use of Paid up Additions and a term rider, make for the best way to maximize rate of return on the money you place into the policy. The Death benefit will also grow quite agreeably (in fact better) than the alternative L99 policy.

Protection

This all being said, here's where the L99 product beats the 10 pay, bringing added insurance to the table that could make your financial situation better in a worst case scenario. The L99 product combined with waiver and guaranteed increase option could create a situation where base premiums are waived, and additional insurance products are purchases under the waiver rider without your having to pay out of pocket for them; here's how.

L99 with waiver and GIO (guaranteed increase option) would mean if fully disabled the waiver rider would waive premiums for your original policy and, when combined with GIO, would exercise all of your option dates under the GIO of which you would have 7. The policy could be set up so that each option is a maximum of $250,000, that means up to 7 additional purchases of $250,000 of WL without having to prove evidence of insurability, and the waiver rider pays the premiums. Note, this would require some tweaking to what you've looked at so far, but it is a minor change, it also adds the GIO rider cost, which is $150 per year (not what I think you would consider extremely significant). So, if there is a true appreciation for what insurance can do you for you, and you are more concerned with leaving options on the table at the cost of some cash value, then L99 is the right choice for you. If this is the case, my appologies for getting it wrong. As Kenbill has suggested, there is added flexibility.

But, we need to be clear about this also, there is flexibility with the 10 pay, it's just not insured flexibility (what we get with the waiver rider and GIO). As we've discussed the option is on the table with the 10 pay to place additional money into the policy after 10 years with the Lifetime Paid up Additions rider.

In any event, if the latter is truly of interest to you (waiver, GIO, etc.) then Guardian truly is the company to look at, yet again. No other company I'm aware of will offer as many option dates on the GIO, and no one else offers as high a maximum at $250,000 per option. We are after all said and done talking about a total potential of $1,750,000 in WL insurance being purchased on your behalf by your waiver rider, which will have it's own cash values to which you would have access.

To be clear, it would be base WL only, they will not recreate the $25,000 per year for 10 years scenario your first policy has.

Now, the possiblity of exercising all 7 options under the policy is low, but addmittedly the possibility of becoming sick or injured and using the rider aren't all that low, about 1 out of 3 at some point before age 65 for you.

You would be giving up some cash value in the L99 product when compared to the 10 pay, to add the benefits of this feature.

So again, if guaranteeing maximized cash value is seconadary to ensuring additional financial strength when sick or injured, and you are looking to give up some cash value in your original policy to ensure this, then the L99 scenario makes a lot of sense.
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in 5 payments, for the L99 it'd kick in 94 payments

Also, to be clear, it would actually be 67 payments. There are 72 years until you reach age 99 and the policy is paid up. 72 - 5 = 67

 

[BNTRS]

And here's the illustration ledger to compare numbers

 

[luxlux]

Thanks for this helpful thread!

One question I have though:

Assuming that a person is going to get a 5 pay policy (rather than a 10 pay), and they have a choice between either

(1) adding PUAs using Term Blending,
(2) or just getting a higher face value policy...and paying about the same total premium

Wouldn't these two situations be roughly similar, since you are buying insurance that is going to be completely paid up in 5 years?

 

[BNTRS]

To be clear, the major benefit of PUAs in a blended policy is the ability to coninue contributions beyond the paid up period. The only major 5 year product I'm aware of is NYlife's Custom WL product, which would not allow such a thing.

No one can say yes or no just paying the premium would be better, we go with the fact that you pick and choose what you think you want. Either Paying only for 5 years and being done, or paying at least 10 years with the ability ot use PUA's beyond that time period.

 

[VolAgent]

Thanks for this help thread!

One question I have though:

Assuming that a person is going to get a 5 pay policy (rather than a 10 pay), and they have a choice between either

(1) adding PUAs using Term Blending,
(2) or just getting a higher face value policy...and paying about the same total premium

Wouldn't these two situations be roughly similar, since you are buying insurance that is going to be completely paid up in 5 years?

I'm going to let you in on a little secret that is driving you crazy.

Insurance is subjective, not objective.

There, now go buy your policy.

 

[luxlux]

I'm going to let you in on a little secret that is driving you crazy.

Insurance is subjective, not objective.

There, now go buy your policy.

What drives me crazy is the lack of quality information and high pressure sales.

I agree that there are some factors that you can't know with certainty, but there are some that you can be fairly certain of. This is how you deal with risk and make informed decisions....otherwise why buy insurance at all? Or why have different policies...if there is no point in picking one over the other? Perhaps the life insurance website it should say "just pick whatever...it doesn't really matter in the end...you'll be dead anyway"?

Finally, I really hope that the insurance companies don't think it's merely subjective when your beneficiary asks them to pay up. Maybe Prudential thinks it's "up to interpretation" whether they pay fallen vet's families.

BNTRS -

I think I phrased that wrong. That I meant ask is:

Is having a 5-pay policy with PUA similar to having a 5-pay policy without PUAs but a larger face value...assuming that the total yearly premiums are about equal? I think I know the answer now.

Anyway, thank everyone for all your help.

 

[VolAgent]

Where is the high pressure sales?

But you would be amazed how malleable contract law is.

What I mean by subjective is that it is impossible to tell you whether a comparable Guardian, Mass, or NYL policy is going to be better for you 20 years down the road. Which one is better for you now depends on your situation and goals, and even then you could make sound arguements for any of several policies from several companies.

At a certain point, you just have to pull the trigger and take action. Based upon how indepth you have gotten about this, I take it you are some type of engineer?

 

[Larry Tew]

This is like the mule who starved to death standing between two hay stacks. He just couldn't decide which one to eat from.