Looking For a Whole Life Policy

[VolAgent]

BTW, for everyone else on the forum, apparently Jethro has been with The Hartford for at least 4 years.

Just hasn't learned much from them.

Also, it's not "whole life sucks"... it's Hartford's whole life that sucks.

They've really let this nimrod hang around for 4 years? It doesn't say much for Hartford. Of course, I know a guy on the P&C in the area who did a scorched earth on his way out the door at his previous job. Real class act there.

 

[stevew7]

I have to be careful about what I say around here as people have a fondness of searching and quoting me

Hi Stevew7, welcome to our forum, and welcome to the shark tank (HAAA!)

I appreciate your many posts, educating me on the topic. I'm an engineer and so like to understand how things work by nature, and you've educated me tremendously on WL policies and their various options.

It's referred to as many different things, but it's rather easy for us agents to get a hold of the most recent release of data. You should learn some other critically important concepts in the world of this sort of financial plan that will make simple IRR somewhat secondary of a concern. NML, for example, does boast a great 20 year IRR, but the majority of that comes from the first 10 years while the last 10 have been less impressive, they've been trending down, but still very happy to talk about what they were doing more than a decade ago...big deal.

Could you expand on "critically important concepts in the world of this sort of financial plan"? Basically, the feeling I'm getting is "don't worry about the IRR, just focus on getting the right policy." To me, that's almost like saying, hey, once you've decided you want to invest in a SP500 index fund, it doesn't matter which one. To me, that's a cop-out - while I agree that deciding WHAT to invest in is an important decision, it is just as important to choose WHICH of those to invest in. Similarly, when I've figured out the right type of WL policy to purchase (it seems that nearly all companies offer similar policies), I want to find the best performing company historically (or at least have it be in the top few).

Is some of the resistance in not comparing IRRs just due to not being able to sell all companies? ie, if company A has performed the best, since you can't sell company A, you recommend company B instead? Just would like to understand any biases here. I fully understand past performance doesn't guarantee future results, but I don't think that means you should completely discount past performance either.

The use of Paid Up Additions (PUA) accelerates the cash growth, and the deal get's sweeter as you move into a period where the only money you add is PUA (after year 10).

So, is this one area of differentiation among carriers? Do some not allow PUAs once the 10 pay period is up? Now that I understand it is easy for the agent via the software to make sure the policy isn't a MEC and that the home office checks this with every payment, that relieves one of my big concerns.

Basically, one big piece nugget of knowledge I've learned here is - I'm healthy and very insurable now, but that could change at any moment in the future -- the cost of insuring me will go up dramatically, and thus my IRR will go down. So now is the time to figure out what do and I greatly appreciate educating me.

Thanks,
Steve

 

[DHK]

They've really let this nimrod hang around for 4 years? It doesn't say much for Hartford. Of course, I know a guy on the P&C in the area who did a scorched earth on his way out the door at his previous job. Real class act there.

I wonder if Jethro should check out Top Gun Producers Index page and see if he can match wits with Rick over there???

Although I think he'd fail the anonymity test... because it's REALLY stupid to be a registered rep, to post in an online messaging forum with your real name... where it can be considered "unapproved advertising" and get into real troubles and issues with your own compliance department.

 

[Larry Tew]

...So, with that said, wouldn't an ideal policy (for me), have the highest cash values?

It depends on how you use the policy. What good is cash value if you don't use it? If you access it during your lifetime, the cost of accessing it may be more important than how much cash value there is. What's the loan interest rate? Direct or non-direct dividend treatment?

Even if you don't plan to use the CV, the policy with the highest CV (or more accurately, highest IRR on the CV) may not be the better deal. For example, for equal premiums, "A" has a lower face amount and higher cash value IRR than "B". Is "A" better? Maybe NOT if you add the cost of term insurance to "A" to equal the death benefit of "B".

 

[VolAgent]

I wonder if Jethro should check out Top Gun Producers Index page and see if he can match wits with Rick over there???

I guarantee you that Rick has forgotten more about VUL that Jethro ever thought he knew.
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Could you expand on "critically important concepts in the world of this sort of financial plan"? Basically, the feeling I'm getting is "don't worry about the IRR, just focus on getting the right policy." To me, that's almost like saying, hey, once you've decided you want to invest in a SP500 index fund, it doesn't matter which one. To me, that's a cop-out - while I agree that deciding WHAT to invest in is an important decision, it is just as important to choose WHICH of those to invest in. Similarly, when I've figured out the right type of WL policy to purchase (it seems that nearly all companies offer similar policies), I want to find the best performing company historically (or at least have it be in the top few).

Steve, I'd just say we are being more honest than most stock jocks and mutual fund companies. We are willing to admit that we lack a crystal ball that can predict the future. The only prediction I am willing to make is that you will not see a major mutual (New York Life, Northwestern Mutual, Guardian, Mass Mutual, even Ohio National and Penn Mutual) miss a dividend payment in your lifetime or your children's or grandchildren's without a complete collapse of our economy. Now, buying a whole life policy is much more of a marriage than buying an index fund. Divorce is always expensive, an index fund is just dating.

But really, anyone who promises you that one whole life policy of similar design will outperform another is being dishonest to you and themselves. Now, if you take dissimilar policies, then yes there can be clear differences. Also, I know you are looking at a 10 pay, but you might even want to consider a paid up at age 65 policy, or a straight pay to age 100 with enough PUAs to get it to just short of being a MEC. It lets you put money in for more years. If you ever get to a point where you are tired of paying, you can always use the reduced paid-up option.

 

[xrac]

Except now, he is on his going to have to make his 12th attempt.

Nice to know someone got a new job in the crappy economy. But looks like the Hartford still hires people who completely lack knowledge of both technical and applied basics--that's always been my experience.

Good luck with the VUL sales, and remember, it's better to be fired than quit...that way you can collect unemployment.

Have you read his other posts. They don't all make sense.
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For Whole LIfe I like Guardian. They are very conservative and have had a good steady rate of return.

 

[BNTRS]

I appreciate your many posts, educating me on the topic. I'm an engineer and so like to understand how things work by nature, and you've educated me tremendously on WL policies and their various options.

You're welcome. I love Engineers, they are the only ones who ask complex questions and actually care about/comprehend the answers.

Could you expand on "critically important concepts in the world of this sort of financial plan"? Basically, the feeling I'm getting is "don't worry about the IRR, just focus on getting the right policy." To me, that's almost like saying, hey, once you've decided you want to invest in a SP500 index fund, it doesn't matter which one. To me, that's a cop-out - while I agree that deciding WHAT to invest in is an important decision, it is just as important to choose WHICH of those to invest in. Similarly, when I've figured out the right type of WL policy to purchase (it seems that nearly all companies offer similar policies), I want to find the best performing company historically (or at least have it be in the top few).

This is a big answer that dives into some of the finer details of WL. Let's try to simplify it by breaking it up a bit (it's going to get real messy real quick fair warning):

1. Apples to Oranges

The dividend analysis (as it is commonly called) compares base policies at two different ages at a certain db (45 and 55 $250k and $1 mill) and compares the results. This is helpful in a very limited applicable circumstance (e.g. someone who is either 45 or 55 and wants to purchase either $250k or $1mill in db). So there are a lot of additional pieces that are being ignored:

1a. Paid Up Additions

The biggy here is the charge placed on PUA's. Like a mutual fund, there is a load fee for a PUA, which varies widely among insurers. Here's a couple with which I'm immediately familiar:

Northwestern: 8%

Guardian 5%

Massmutual 7.5% and contractually can rise to 11%

New York Life 3%

Ohio National 5%

Met Life 3%

These charges effect the cash value growth in two ways:

1. Personal overfunding

2. Dividends reinvested

The higher the charge, obviously the less of your money remains

2. Dividend Treatment

Both Larry and I have mentioned the recognition of dividends. There are two ways this is handled either Direct Recognition or Non-Direct Recognition. Here's what they mean

Direct Recognition
Means the insurance company can adjust the dividend paid on portions of the policy that are used as collateral for a loan. This means they can either pay a lower or higher dividend for portions that are backing a loan.

Non-Direct Recognition
Means the insurance company cannot adjust the dividend on any portion of the policy.

There's always a lot of debate over which is better. As Larry alluded, direct recognition tends to work out better for accumulation purposes, and non-direct recognition tends to work better when accessing the money. I'll refrain from expressing my opinion at this very moment.

3. Dividend Banding
Many companies pay slightly different dividends on different death benefits (i.e. they get better as the db increases). We don't really notice this with this analysis.

4. Products

A big problem here is something I alluded to before, the contracts that these analysis put under the microscope no longer exist, in essence. Sure there are products that are similar, but there were many different assumptions taking place at the time (you're going to ask what, I'll answer after you do)

2. Product Purpose

I'm a pretty big advocate of life insurance as an asset class. And I sell a decent amount of life insurance for this purpose (in fact it makes up probably 90% of what I do). I don't find myself making too many recommendations to purchase pay to age 100 et. al. to people who want to do what I think you are trying to do. Not to sound like a BOY junkie, but it definitely is a different product design, with a very different approach, and that approach is definitely not addressed with the Full Disclosure Dividend Analysis. We're talking about stuffing cash into these policies until they almost pop. Yes, dividend rates are important, and sure past performance matters to a degree, but the way in which money can come into the contract and the flexibility are more important. I could have the highest dividend rate by 100 bps for the past 20 years, if I only have a full pay product and a max PUA limit of $1000/year you aren't likely going to get far with me.

Is some of the resistance in not comparing IRRs just due to not being able to sell all companies? ie, if company A has performed the best, since you can't sell company A, you recommend company B instead? Just would like to understand any biases here. I fully understand past performance doesn't guarantee future results, but I don't think that means you should completely discount past performance either.

In some respects there might be an element of this going on--depends on the person. A NML agent would suggest this is why I don't like NML, because they won't let me--or anyone else--broker their product. But in truth I choose to dislike NML because their base WL premiums are really high, their load fees are insane, and their version of direct recognition (which is their only option) is terrible. There are other companies I'm personally not interested in talking about because I don't have a relationship with them. But I've taken an extremely large amount of time reviewing this stuff, and the companies I talk to clients about are, in my opinion, the companies to look at.

So, is this one area of differentiation among carriers? Do some not allow PUAs once the 10 pay period is up?

Exactly.

the cost of insuring me will go up dramatically, and thus my IRR will go down.

Actually, that's not 100% true, at least from the IRR side. Sure having more time on your side is extremely beneficial, but that's true of any savings plan where compounding is going on. Unless you are rated, the IRR isn't going to be substantially different in most cases. Sure, there's a different between standard and preferred plus, but there's a much bigger difference between standard and rated in most cases.

 

[andins]

Steve. It appears you've done some of your homework on this. What part of Illinois are you in? I'm in the Chicago west subs if you would like to talk please feel free to email me at [email protected], I am the least pushy person when it comes to this. However, i would be happy to discuss your objectives. If need be I have financial partners that can help in this arena. Have a great day! Dan

 

[DHK]

Can you say Super Roth with a death benefit?

Can we say "stupidest reason ever to buy a life insurance policy"?

Let me show you how to "buy a tax-free mutual fund" and get a free medical exam!!!

I'm SO glad I left the credit union to learn how life insurance REALLY works.

 

[WPM]

Let me show you how to "buy a tax-free mutual fund" and get a free medical exam!!!

Ah, the good old pre dot.com bubble days!