Follow along with the video below to see how to install our site as a web app on your home screen.
Note: This feature may not be available in some browsers.
In theory, you can do a paid up in any amount of years you want depending on the face amount and the MEC. Pretty easy to design a permanent product however the client wants through a whole life or UL product.
Northwestern is a good company, they definitely have great financials. However, their premiums are a little high and they have a steep load fee on their paid up additions (the mechanism used to overfund the policy)
And important metric that often goes overlooked is the surrender cost index. Northwestern and Guardian have consistently had the lowest costs index in the industry.
Guardian has an amazing product that I think you should take a look at. If you really like your agent at Northwestern you should talk to him about this. Northwestern is proprietary and won't let other non NMFN agents sell their products, but they are not a captive company so their agents can sell other company's products.
Whole Life insurance is a great foundational piece to a financial plan. Unfortunately a lot of people fail to understand how it works.
I'd be happy to answer additional questions
Hello Guru and all,
My first time on this site and first post. A very nice, sharp, honest person is working for this company and showed me some insurance options including whole life. It may be academic because there is a medical screening I may not pass. But, my question is why are there such strong opinions against whole life? Is it prejudice? Ignorance? Bad actors selling this in the past? The illustration shown to me was plainly described as an illustration not a guarantee, but that the co has never paid less than the illustration of 5.8% in its long history. It was explained that for it to work best, it must be kept in force with prompt payments or I could take a hit. In the plan created for me, it is front loaded to be paid in full in less than 10 years. Then I have permanent insurance and within a couple of years of it being fully paid, it breaks even on cash value to that which I pay in. Then it grows at the illustrated rate or better or worse. What am I missing? Why do Suze Orman, Dave Ramsey and others state flatly that one should only buy term life insurance?
Thank you!
A potential consumer of whole life
Hello Guru and all,
My first time on this site and first post. A very nice, sharp, honest person is working for this company and showed me some insurance options including whole life. It may be academic because there is a medical screening I may not pass. But, my question is why are there such strong opinions against whole life? Is it prejudice? Ignorance? Bad actors selling this in the past? The illustration shown to me was plainly described as an illustration not a guarantee, but that the co has never paid less than the illustration of 5.8% in its long history. It was explained that for it to work best, it must be kept in force with prompt payments or I could take a hit. In the plan created for me, it is front loaded to be paid in full in less than 10 years. Then I have permanent insurance and within a couple of years of it being fully paid, it breaks even on cash value to that which I pay in. Then it grows at the illustrated rate or better or worse. What am I missing? Why do Suze Orman, Dave Ramsey and others state flatly that one should only buy term life insurance?
Thank you!
A potential consumer of whole life
ACL goes to 121 years of age, not 90, just wanted to clarify.2.) You haven't stated, but my guess is he's recommending NMFN's adjustable comp life, which is a guaranteed paid up policy at age 90. The sooner something is guaranteed paid up the higher the premium. both Guardian and Massmutual have products that are paid up later, bringing a lower premium, meaning more over funding, which will yield higher cash values.
11/23/2013
Hey everyone, sorry I am a bit late to the party. I am no expert, no insurance person, and certainly no adviser but I have done my research on this particular subject for a long, long time.
First off, full disclosure here, I am a huge fan of Dave Ramsey. I think he is correct on most all of what he says. He has a great ministry, great business, and has really good advice for most average people. Does he go too far sometimes? Yes. Why? I think human behavior, he knows if he tells you to save $1,000; you'll get to $950 and think, ah that's good enough. So he knows if he tells you that some debt is ok, it will come back to haunt him and you. After all, he is selling his advise and books.
I think he is absolutely right on paying off ALL your debt. Mortgage, student loans, all of it. No debt. Aside from the great security it gives you, why would you willingly give away your money to a bank? The average person in 2005 paid $13,500 in mortgage interest (US Dept of Comm). $13,500!! And the average total US consumer interest (mtg, cars, credit cards) was $16,900.00, that is 36.7% of the average US salary that year ($46,000). That said, what investment do you KNOW that will make you $16,900 year, guaranteed? Nothing. Instead of throwing away $16,900 a year, you keep it! You just had a 100% return because you now don't have a 100% loss on that money.
Keep in mind that your mortgage, if paid in full, at 4.5% is a -100% return, yes negative. At 6.5% it is a -200% return. And please don't spout the non-sense about a tax write off---you're paying a bank $13,500 a year to reduce your taxes by $2,025? That is a terrible trade! Keep your money. Instead of being out $13,500 in interest paid from cash you would have $11,475 in cash. I like that trade better. Moving on...
I said all that to say this: I think that Dave is wrong about investments for the average, retail person. NOTHING FITS EVERYBODY. But the buy term and invest the difference (BTID)? I have no idea where his average 12% mutual fund return number comes from. There is no magic fund. No magic market. A 100 year average is just that, a 100 year average. If you haven't been in the market for 100 years, you won't get that. In fact, I just read a Dalbar study that said the average 20 year return on a mutual fund is only 3.8%. 3.8%??!! All that risk for that tiny return. And that doesn't even account for taxes and inflation over time you have to pay. The markets have returned about 9.6% since 1928 BEFORE inflation, after, its only about 6.2% (USA Today).
I also found where an average joe stock trader only gets, on average, about 2% back in the equities when losses are accounted for (can't remember where I saw this right off). Remember that is average, half of yall did better, but half are thinking, I wish I had that return! What causes the 2%? My guess, again, human behavior. If the average guy has control, he is influenced by news and friends. Selling low and buying high.
I simply don't think the average normal guy can really beat the markets nor match them. The information he is supposedly legally entitled to, that the pros get, he gets late or never at all, the big wig fat cats that control the markets have already tanked the stock and your money is gone. I have tried the markets and most of my good gains eventually get (at least partially) wiped by losses. Do you realize a 15% gain one year is totally erased PLUS some of your principal with a 14% loss the next year? Do you realize a fund can have a positive return average and you can make $0 or even loose money?!?
Now, I don't know a lot about insurance and stocks but I know this: There are two things sure in life, death and taxes (Ben Franklin, 1817). I have knowledge of a tool that I can cash in on death and avoid some taxes. That is whole life, when used correctly (specifically I looked at NWML's Adjustable Complife). Everyone who has ever lived has died. So why would you not want to buy a policy that is SURE to PAYOUT? Term life bets you won't die, Whole life bets you will die. Yes it costs money but so do all investments. Lastly, there are few things in this life that carry guaranteed returns or guaranteed anything for that matter. Whole life is guaranteed; if you pay the premium, they pay the claim. I know no other investment that carries a guarantee. On top of that, if you have paid off all your debt, my attitude is that you don't need the risk of the markets. Take the guarantee and keep what you've got. Build guaranteed value slowly over 30 or 40 years. There is no way to get rich quick. Take it for what its worth, I have nothing to gain or loose in this.
That guaranteed value, guaranteed payout of my cash and the insurance amount and the ability of being able to know I will leave a legacy to my children is worth something, at least to me anyway. What's it worth? That is up to you.
Fantastic 1st post sir.
I love it when I see consumers who have done their own real "due diligence", ignoring claims, and finding truth and logic. Regarding your life insurance statements above, a couple of my common lines that I share with clients:
"term is a gamble, permanent coverage is a guarantee"
"do you rent or own your life insurance coverage?"
"how long do you want your life insurance to last?"
Sometimes questions are better than statements as it allows people to draw their own conclusions.
In todays interest rate environment though I really would encourage you to re-examine your thoughts regarding "paying off ALL DEBT AT ALL COSTS". 95% of debt fits this statement, however for most people, not the mortgage.
Take a couple making 125k with a 250k mortgage paying 3.5% on a 30 year fixed mortgage. The 3.5% goes to the bank, and to your point the IRS gives back only about .75-1% in deduction/additional tax refund. However it does mean that the "effective cost" of borrowing the money is just over 2.5%. Many of my clients thanks to the current administration are paying close to 45% tax (federal, state combined)....so a 3.5% interest rate on a mortgage effectively gets them 1.5% back in the form of the IRS deduction....making their net cost 2% to borrow money on a home.
Let's say they received an inheritance and "could have" paid 250k cash for the home instead of taking out the mortgage. Do you know how to calculate that "lost opportunity cost"?
Even over the past decade, which we all know hasn't been stellar for the economy or the equities markets, through a mix of real estate, equities, and other investments that 250k could have easily averaged 5-7%