Whole life 1035 Exchange

[Allen Trent]

So let's sum up (again):

NYL agent originally sold a $600k WL policy with premiums of $12.5k per year.

Same agent leaves NYL to go to MassMutual.

Because the now MassMutual agent cannot service the NYL policy, BUT can replace the policy AND create substantially similar premiums while increasing coverage (looking at a cost per thousand), replaces old NYL policy for the MassMutual policy for a total of $1.1m of coverage for $22k annual premiums while doing the 1035 exchange to preserve the tax status of the existing cash values.

Oh, and did the replacement 6 years after the original policy was in-force, thereby being in compliance with his non-solicitation agreement (not to replace for 2 years). Which is also pretty damn good because you're 6 years OLDER and STILL got substantially similar premiums.

I see absolutely nothing wrong with this.

agree if both policies are truly both entirely whole life & not UL or term riders involved. If client got a better risk class & new policy projected & guaranteed illustrated as good or better than existing policy.

however, 2 year contestability is & was a real risk in cases like this. I just think "not being able to service an old policy" is a horrible justification for replacement itself.

When I was producing & managing producers, we encouraged hundreds of clients to keep their old Northwestern Mutual, Mass, NY Life WL policies & supplemented with new permanent or term. Agents kept copies of policy info to assist beneficiaries to file claims in the future. In many cases, also advised clients on how to call the carrier to ask questions on how to fix some loan problems on policies where they could have dividends apply to pay down loans, etc.

Restarting surrender charge periods or going through new early year high cost years can rarely be guaranteed to be better for client when new policies today generally have much lower guaranteed interest rates embedded & lower dividend scales due to the long low interest rate environment

Need more specifics to know if this was good or bad for client, but I am still not sold that the old policy was improved by being moved. Likely met a suitability standard, but may not meet a best interest standard like is the case with Annuity products in most states.

regardless, the client was responsible to read the documents he signed & likely signed one like this. however, it is cases possibly like this in the annuity industry that have led to Best Interest regulations being implemented where producers jump ship from company to company & churn the account values because it is easier to call existing clients than to find new prospects who have no coverages

 

[DHK]

Since death did not occur within 2 years of 2017... I don't necessarily see how this can be made into a current complaint?

Agreed regarding the policy structure, type, underwriting class, etc.

 

[Allen Trent]

Since death did not occur within 2 years of 2017... I don't necessarily see how this can be made into a current complaint?

Fair enough, my point wasn't a justification of current complaint but more a reason why agents need to be more cautious when replacing existing coverage

 

[Lloyds of Lubbock]

So he bumped the db 500k.
If the premiums are similar, how did he do this?
Term rider?
Whole life to a UL type of policy?
Did he illustrate the 1035x with a similar premium using loans and withdrawals?
Taking a 6year old policy and 1035 exing it into a new whole life is a problem to me.
I paid most of the expenses, now I am starting from scratch and my money that goes into PUA is being dinged a sales charge.
Also you are probably not getting a dividend for two years.
If it is UL based you have surrender charges for at least the next 15 years.
There are a lot of problems here but we are only getting your side.

 

[Newyork99]

Both policies were created with the same health status, hence as you have implied it is a good thing to have the same status in the MM policy six years later.

In the NY Life policy, I had paid a total of 80.4k in premiums in 6 plus years, the cash transferred to MM was 63.4k.

Had the NYL been intact till 2035, the total of premiums paid would have been 301k. The cash value would have been 463.5k (54% increase) and death benefit 930k. With the MM policy, in 2036, the total of premiums paid would be 504.3k. The cash value would have been 729k (44.6%) and death benefit 1459k.

The difference of total premiums in the two policies is 203.4k. The difference of cash accumulated in the two policies is 265.6k (30.6% increase). The difference of death benefits in the two policies is 529k.

Compare the 54% increase vs 44.6% and 30.6%.

Can you kindly show me your reasons for justification of the transfer?.

 

[DHK]

Had the NYL been intact till 2035

Illustrations are how the policy can be projected based on CURRENT dividends at the time the illustration was printed.

Please notice the term "non-guaranteed" on the tabular or numerical values.

You think you'd have a given benefit... but dividends have steadily declined for decades.

I don't think you can use a non-guaranteed factor in a legitimate complaint, but I'm not an attorney, nor do I play one on TV.

 

[DHK]

There are a lot of problems here but we are only getting your side.

And his side doesn't have a leg to stand on, thus far.

Until we can see some actual illustrations from the time of sale, all of this means nothing.

And his assertions... so far, don't mean squat.

 

[Newyork99]

Please post your email, I will send both illustrations that have guaranteed and non-guaranteed values.

When I made the above calculations based on non-guaranteed values, as you say if dividends have been going down steadily, it is the same for both companies, hence for comparison purposes should it not matter much?. Thanks.

 

[Newby]

So let's sum up (again):

NYL agent originally sold a $600k WL policy with premiums of $12.5k per year.

Same agent leaves NYL to go to MassMutual.

Because the now MassMutual agent cannot service the NYL policy, BUT can replace the policy AND create substantially similar premiums while increasing coverage (looking at a cost per thousand), replaces old NYL policy for the MassMutual policy for a total of $1.1m of coverage for $22k annual premiums while doing the 1035 exchange to preserve the tax status of the existing cash values.

Oh, and did the replacement 6 years after the original policy was in-force, thereby being in compliance with his non-solicitation agreement (not to replace for 2 years). Which is also pretty damn good because you're 6 years OLDER and STILL got substantially similar premiums.

I see absolutely nothing wrong with this.

The 2-years starts from the day the agent changed companies. Not when the policy went into force.

 

[DHK]

The 2 years is about the company's interests, not the client, so I think it's still immaterial.