Reputable? Whole Life with Northwestern Mutual...

[mx_599]

If you are only looking for asset protection, I'd find someone who specializes in that field, not a life insurance agent....sounds like you really need a good disability insurance policy though if you don't have one already.

I will eventually probably look into an asset protection company. Right now I really don't have much, nor will I ever. Once I finish residency though, there will be a substantial salary increase.

Some of the asset protection companies seemed a bit shady. I was looking at some of their websites. I thought I could do some of it on my own, or at least get a jump on it now. I am wondering if simply a good lawyer and financial planner and agent is good enough...do I really need to pay an asset protection company??? The lawyer, planner, and agent will cost enough! plus, I am not making that much money. probably less than you guys. Talking like I need a lawyer, planner and agent makes it sound like I am a celebrity or something.

mx
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Direct recognition isn't so bad so long as Northwestern has a different dividend rate for policy loans (a higher one).

On a completely different note, please tell me you and your agent have talked about disability insurance--you just spent all that time and money on med school, don't chance it--and please tell me you don't have a northwestern policy. I can give you mountains of reasons why I state this.

How much can a decent disability ins cost per month? do you guys think this is something a resident should look into? I know education loans are forgiven if you die...i wonder about disability. i have to look into that. it would suck if i had to pay on a 275+k loan if i couldn't work.

mx
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The following is a lot of stuff, but here goes...

1.) The Fee NMFN is going to charge for over funding is quite high 9% compare others in the industry Massmutual at 7.5% Guardian at 5% and NYLife at 3%.
i dont even understand this. i need to discuss this more with him. i am going to have money taken away because i put extra in??? and why is NYLife so much less? how is NYLife for some of the other things we dicuscussed so far, like Direct vs Non-direct recognition?

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.
paid up later than age 90?? this seems like another ding against Northwestern

3.) Northwestern's waiver of premium rider (this should definitely be on your policy) has a 2 year own occupation disability definition, Guardian is 5. Meaning you can be sick or hurt and unable to practice, but still able to work doing something else and still receive benefits (in this case your policy premiums will be paid for by the insurance company).
hmmm, my head is starting to hurt. riders? so what if disability went beyond 2 or 5 yrs and you were working doing something else? can you become disable doing anything? like skiing or biking?

4.) Northwestern will charge a higher modal factor when you pay your premiums monthly than Guardian. This one won't be a huge difference, especially at this point. It translates to about something in the range of 1-2 dollars more per month as a fee to NMFN.
wtf

5.) When it comes to loan interest rates (and this is only an issue if you never plan on repaying the loan, there are times when you might I'll explain more later if you wish) Northwestern will offer either a variable rate or a permanently fixed 8% rate. Guardian stats at 8% and drops to 5% after 20 years or age 65, which ever is sooner.
hmmm, i am not sure i understand about taking a loan out and paying it back or not paying it back and the pros and cons of the ramifications involved. but this is not up to you guys to explain. maybe i can ask him.

6.) Something we haven't talked about. Both companies will offer an accelerated benefit so you can access a portion of the death benefit if you become very sick. Northerwestern will give you access if you are terminally ill only and caps the benefit at $250,000. Guardian offers the benefit for both chronic and terminal illnesses (or the loss of two acitivites of daily living--no it's not long term care insurance, but it can act as a supplement) with no cap. Of course, the viatical and life settlement guys will tell you there are other options. There are, but this one leaves you in the most control
this seems like another negative for Northwest

Both are strong, both have been around for a long time, and both have remained on the top of the financial strength lists for a long time. Northwestern is bigger, has slightly higher ratings from the crediting agencies, and likes to boast about paying the most dividends to it's policy holders out of all the companies in the industry. Guardian has been able to compete toe to toe for over 100 years, and had an amazing year last year and has maintained it's impressive financial strength this year, they also currently have a higher dividend rate, but as I and others have mentioned earlier that number is only a piece of the puzzle.

i have a headache
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Guardian also has the own-occupation definition on their disability product. One of our long-time clients bought an own-occupation disability policy from us when he was just out of med school as an OBGYN. Didn't think he'd really need it and sort of balked at the high premiums, but decided to do it. 10 months later was diagnosed with cancer. He is still alive today and doing well, but received about $150k/year on the disability policy (tax-free) for about 20 years and was still able to work in another position when he recovered to supplement that substantially.

do you know if there is any kind of benefit to having two policies with one place...like if i got disability and whole life with one place...guardian, do i get any type of better rate?

wow, that is a good story. it does make me want to get some. what kind of monthly premium approx would one have to pay for that kind of benefit? can you be doing something like rock climbing or bungee jumping and still claim these disabilities?

mx
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I know disabilities are for older people who don't take care of themselves. I too am a relatively young person in good health (run a lot and all that jazz) but I've seen too many cases where younger people got blind sided by things they never expected, and I may not remain healthy forever. the longer I wait the more it will cost, and I may come to the day that I can't get it. Keep in mind, your income drives all that you plan to do; without it, we wouldn't be able to have the conversation we're having now.

You want to retire at 50, but could you retire tomorrow? If the answer is no, I'd strongly encourage you to take another look at disability insurance.

As far as the MEC goes, you'd likely get another policy and begin over funding that when the time came for increased contributions. You can put a Guaranteed increase option on the policy. Again this is a point when I see Northwestern lagging a bit. They limit the GIO or $150,000, Guardian will give you up to 250,000 or your current death benefit. You could alternative put a very inexpensive term rider on your policy that you'd plan to convert to whole life inaurance later. Northwestern won't offer this feature. You'd need a separate term policy to do it, which will likely cost a little bit more to do.

you guys are convincing of the disability, but i do not know how much i can afford monthly. what kind of monthly premiums are they?

term rider to convert to whole life?? but i would already have whole life?

so the likely scenario is that i would have this whole life now and then open a second whole life in a couple yrs so i can over-fund it more while staying below MEC status? is this stupid to have two concurrent whole life policies? or does it happen a lot? is there any major con to this?
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DHK, I wouldn't call him an *** for that. There is a trend of doctors practicing bare because E&O is so outrageous. They hold their assets in instruments protected from judgements or bankruptcy. In most situations life insurance is protected from judgements and bankruptcy. This sounds like a smart forward thinking individual to me. The danger of a personal judgement aren't too great if assets are untouchable. O.J. Simpson had a multi-million dollar verdict against him and was still able to live a life of leisure.
To me he sounds like he is thinking right concerning insurance. There is nothing wrong with NWML or Guardian but I would prefer a non-direct recognition company if I were planning on tapping the cash.

do you guys know off the top of your head of some other instruments protected from judgements or bankruptcy besides whole life?

another vote for non-direct...this was Guardian i believe

mx
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Impossible to get that type of returns in conservative debt investments that most companies invest. Now, one can project better returns, but who knows. Interesting that the IRS considers life dividends as a refund of overpriced premiums. Get other options from other advisors. Ask the agent to do a IRR on policy equity. Never viewed WL as an attractive investment choice, a good risk management tool for some folks, but I can't think of a situation where it really fits.

okay, i can ask him
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First off congrats on finishing up medschool. My son is 3rd year in St.Louis. This month he's obgyn-ing it.

I don't know if I would overfund the policy to MEC status (ask your agent he'll explain) because if you plan to tap this a bit, you don't want to make dividend surrenders taxable. You will also do some other things too that you can tap.

no no, we do not want it to reach MEC

congrats to your son too. i am catching babies this month as well...
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Did some additional research for my own edification. NMFN has a pretty hefty annual policy fee. It has a base 60 dollar fee, and a $3 per $1000 in death benefit fee.


I did confirm that NMFN has a different dividend rate for policy loans so the direct recognition deal isn't hugely a problem.

so i guess that offsets it?

policy fees of NMFN makes it sound like guardian is better again

 

[BNTRS]

I'm going to try and respond to all your questions. I might fail miserably to clarify everything but here goes...



Asset Protection

I wouldn't hire a company. A good attorney, agent/planner, and accountant should be enough.

For now, I would say you have a good plan, you can get more involved as life gets more complicated for you.



Disability Insurance

A good DI policy usually costs between 3 and 5% of your gross income. The best recommendation I can give you is to buy a policy with a graded premium structure (this means the premium will gradually become more expensive year over year). You'll have the option to level the premium when income is higher and money is less of a scarce resource. This will allow you to get a policy with all the coverage you should have at a much lower initial cost and not force you to wait and end up in a situation where suddenly you are uninsurable or have a policy riddled with exclusions.

NOTE on exclusion (for clarity)

Often times disability insurance carriers will offer you a policy but exclude a condition (much like a pre-existing condition on individual health insurance). Obviously, the risk of this increases as you get older and your medical history gets longer.



Load Fees on Paid Up Additions

Paid up additions (or PUAs) are the mechanism you'll use to overfund the policy. All insurance companies will charge you a fee for the deposit (just like many mutual funds charge a load fee when you buy their shares). The charge is up to the insurance company.

I can't explain why NYLife is so low. I can tell you that NYLife has one of the worst products in the industry and of all the companies we've discussed they'd be last on my list.

While the load fee might seem like a drawback I'd bring to your attention that there is no management fee or continuous charge for Whole Life Insurance. So you'll pay one fee and be done, unlike management fees in a mutual fund or invest WRAP account or Variable Life Policy which continuously charge you a fee annually which is a percentage of the money you have in the account.


Paid up at 90

All whole life policy will be paid up at some point. At that point no additional premium is required. The sooner this happens the more the premium will be. Whole Life Insurance is a return of premium product so the premium you pay you can eventually get back, plus a guaranteed rate of return. Based on this higher premiums aren't necessarily a bad thing.

BUT...

There's also a dividend, and that dividend is dependent on how much death benefit you have. Mutual companies like Northwestern, Guardian, and NYLife are all owned by the policy holders. The larger your policy, the more ownership you have. The more ownership you have the more dividend you get

Warning about to get really freakin' complicated on you!

A paid up addition actually buys an immediately paid up micro insurance policy. You can surrender the PUA for cash--that's why you have an immediate cash value associated with the "dump in of extra money" or purchase of additional insurance. Because you are purchasing additional insurance you have more death benefit, your dividend pay out is getting bigger. This will give you a much higher rate of return. Also, since PUAs aren't subject to the surrender cost index, you'll notice the internal rate of return is higher on PUAs.

MEC limits are set based on dollars flowing into the policy with respect to the death benefit.

Say the MEC level for a 100k death benefit policy was 10k per year. If the premium on policy A was 7k I could put 3k in PUAs into the policy. If the premium on policy B was 6k I could put 4k into the policy. So long as there wasn't something wildly different between the policies, i.e. significantly different dividend rates, the policy with the lower premium will most likely beat the higher premium policy in cash value accumulation. This is true comparing Northwestern's whole life to Guardian's.

Waiver of Premium

Yes you can collect on this rider regardless to what illness or injury takes you out. There are a few exclusion, they include things like committing a crime, serving in the armed forces, and participating in an act of terror (really wild things not likely to be things you participate in) unfortunately neither one is pure own occ forever. I'm not aware of a company that is. One the own occ provision is over you will not be able to still have premiums waived if you are employed.

Modal Factor

The modal factor is the extra charge you pay when paying monthly instead of annually. Just like car insurance, you get a "discount" for paying annually. Unlike car insurance, you do not save money paying quarterly or semi-annually, instead you pay even more than monthly. Guardian charges less than Northwestern does for paying monthly instead of annually. That's all that comment meant.

Loans

Oh boy, this could probably be a book in and of itself (in fact it is). Borrowing money from the policy is permissible basically whenever there is cash value in the policy. When you borrow from a policy there is a charge for interest. You can repay the loan. The interest charge isn't a big deal if you plan on paying the loan back because the interest that you pay goes into your cash value--it's your money you are the lender and borrower, and you are paying yourself back the interest on the loan you lent to yourself (sounds complicated, but it's rather straight forward, it's just hard to imagine such a thing would be allowed, you want to get really wild with this, there are certain things you can do to make this interest you are paying to yourself tax deductible).

You will likely come to a point when you've decided you want cash from the policy but have no intent on paying back loans. Like once you are retired and using the money for regular income purposes. This is when interest rates will matter more.

Accelerated Benefit

Yup this is a negative, their accelerated benefit is simply not as great.

Concerning you headache

Imagine my first few months in the industry

Multi policy discounts

Usually not something you find in the life/health/accident industry. I don't know what Northwestern has. Guardian will discount the Disability policy premium by 5% in the first year only, if multiple policies are purchased within 6 months of each other.

Disability Policy Cost

Do you rock climb or bungee jump? You could receive benefits if something happened during one of these events, but there are some important questions that have to be asked concerning your current involvement in these activities or your plans to do so in the near future.

A quote is easy to get. Let me know if you are interested I can get one to you. Guardian has a program for residents to get disability insurance without proof of financial eligibility and higher than average guaranteed increase options (this will allow you to purchase additional benefit when your income is higher without having to go through underwriting (in other words, you may not be insurable, but you can still get a policy because you have this option on your policy).

Multiple Whole Life Policies

Yes it is very common to have multiple whole life policies. Term insurance is often used to guarantee the purchase, because it can be converted to whole life. Again, allowing you to get coverage even if you become unhealthy and wouldn't qualify.

As you likely know, you'll never have the 100% solution to your future concerning pretty much anything by one move you make. You'll need to review regularly and adjust as appropriate. Just like lots of times people buy multiple disability policies as they get older and make more money. Or exercise guaranteed increase options if their agent was good enough to recommend it from the start.

Other protected assets

It can vary. For example a 403b is protected from liquidation from a creditor, but the minute you take the money out and claim it as income it might be subject to their claim. IRAs definitely not. Annuities, sometimes. Cash value life insurance takes the cake here.

There are some other tricks you can play with an attorney. But you have to have the assets first. Based on what you've described, you don't have that at the moment, so it wouldn't make sense to pay the attorney just yet.

IRR on your policy

IRR on net cash value should be somewhere between 5 and 6% or better beyond year 10. Now think about the fact that you don't need to pay taxes on the money when you take it out, that makes the return even better.

The offset for direct recognition

I don't know if that offsets it. The wording from Northwestern was a little cryptic.








Hope this helps. Feel free to ask for any clarification.

 

[NMFNMDRT]

I have been with Northwestern for 4 years now, and I know exactly the product that the agent is trying to sell you as I've sold many of them to people just like you. The bottom line is like many people on this site have said over and over, you will not go wrong by having this in place for the long term.

Also, before I attempt to play offense with insurance or investments I play defense with a solid DI policy. Northwestern just offered a new medical definition on their DI that is very similar to an own occ. The agent should be able to explain it to you.

I hope you are not overwhelmed with information, and in turn you don't take action on anything. If that agent can't answer some of your questions, then feel free to ask me. Also, I refuse to try to sell you anything as he has already taken his time to visit with you, so you will get completely objective advice.

Good luck and welcome to the forum!

 

[BNTRS]

I have been with Northwestern for 4 years now, and I know exactly the product that the agent is trying to sell you as I've sold many of them to people just like you. The bottom line is like many people on this site have said over and over, you will not go wrong by having this in place for the long term.

Also, before I attempt to play offense with insurance or investments I play defense with a solid DI policy. Northwestern just offered a new medical definition on their DI that is very similar to an own occ. The agent should be able to explain it to you.

I hope you are not overwhelmed with information, and in turn you don't take action on anything. If that agent can't answer some of your questions, then feel free to ask me. Also, I refuse to try to sell you anything as he has already taken his time to visit with you, so you will get completely objective advice.

Good luck and welcome to the forum!

Adding some language about medical specialities and billing codes is hardly a move that makes your product "Very similar to own occ." The truth is, Northwestern still will not pay medical professionals if they are employed else where after two years on their IDI product. You guys abandoned this market in the late 90's.

It's funny to see a NMFN agent talk to an attorney about disability insurance, and emphasize the importance of own occ coverage.

But also...

If the insured can still perform their duties but not as well as they used to and loses income what does NMFN say about the residual benefit?

If the insured loses 18% of their income how much benefit do they receive from the NMFN residual benefit?

How much recovery benefit does the insured receive with NMFN after 12 months?

If the insured is out for a few years and has a COLA rider on their policy what does NMFN do with the increased benefit upon recovery of the insured?

How long will NMFN waive premiums after the insured has recovered?

Will NFMN waive the insured's elimination period if they recover and get sick or injured again for something unrelated to their prior claim?

How often can insured exercise FIO/GIO?

What is the maximum FIO insured can have on policy?

What's the latest date FIO can be exercised?

Will NMFN grant me an exception to their usual rules regarding FIO if I lose a GLTD plan?

Can I get a lifetime benefit rider with NMFN?

 

[bluemarlin08]

I guess I am not the brightest bulb, but why would you fund a life policy prior to having disability and malpractice insurance as well as max funding retirement plan options, 6 to 12 months of forcasted living expenses, guess the agent sees a nice commission rather that what is in the client's best interest.

 

[Death Cab For Tootie]

I guess I am not the brightest bulb, but why would you fund a life policy prior to having disability and malpractice insurance as well as max funding retirement plan options, 6 to 12 months of forcasted living expenses, guess the agent sees a nice commission rather that what is in the client's best interest.

Why would you max fund a retirement plan before funding a WL policy? Seems to me if he needs access to that money prior to 59 1/2 the QP isn't going to do much for the client. Moreover, what happens if the client retires in a 40 or 50% (or higher) tax bracket? What happens if the client gets disabled? Will the QP get funded?

I agree the clients should have malpractice insurance and DI, but max funding QPs before WL isn't the best advice in every senario. In fact, I can make the case that max funding a QP at all is dubious advice.

 

[xrac]

Why would you max fund a retirement plan before funding a WL policy? Seems to me if he needs access to that money prior to 59 1/2 the QP isn't going to do much for the client. Moreover, what happens if the client retires in a 40 or 50% (or higher) tax bracket? What happens if the client gets disabled? Will the QP get funded?

I agree the clients should have malpractice insurance and DI, but max funding QPs before WL isn't the best advice in every senario. In fact, I can make the case that max funding a QP at all is dubious advice.

Qualified plans result in compounding taxes with one potentially being in a higher tax bracket. Don't taxes always get raised? Inside a WL policy one can access cash value at anytime with no taxes.

 

[SetforLifeIns]

If you are a medical resident, it would be even more important for you to consider disability insurance to protect your future income. NML does not provide own occupation for the entire duration of the policy (although it is very hard to ascertain this on their illustrations). Get a thorough quote comparison from multiple companies before making your decision.
Since you are young and healthy now, protect your future income and your insurability.
[email protected]

 

[bluemarlin08]

The assumption that one will be in a higher tax bracket at retirement isn't always true. I have seen clients that during their earning years their marginal rates went from 70% to 39%. Personally, I would never recommend this strategy, but that is just my opinion maybe it will be a better strategy.

 

[NMFNMDRT]

Adding some language about medical specialities and billing codes is hardly a move that makes your product "Very similar to own occ." The truth is, Northwestern still will not pay medical professionals if they are employed else where after two years on their IDI product. You guys abandoned this market in the late 90's.

It's funny to see a NMFN agent talk to an attorney about disability insurance, and emphasize the importance of own occ coverage.

But also...

If the insured can still perform their duties but not as well as they used to and loses income what does NMFN say about the residual benefit?

If the insured loses 20% or more of income or time spent in the working environment, then they are paid a proportionate benefit.

If the insured loses 18% of their income how much benefit do they receive from the NMFN residual benefit?

None.

How much recovery benefit does the insured receive with NMFN after 12 months?

I'll get back to you for sure on that, but I know there is a transition benefit that allows the insured access to therapy. It's in the best interest for the insured and the insurance company for them to get back to work, but I will have to read the fine print to be exact.

If the insured is out for a few years and has a COLA rider on their policy what does NMFN do with the increased benefit upon recovery of the insured?

Well, there are two indexes on policies. One is called the Future Increase Benefit that allows the benefit to grow while the insured is paying premiums and not disabled, and the COLA kicks in while the insured is disabled. Being 4 years in the business I have not had a claim nor have I been asked that question, but I imagine upon recovery the FIB is taken back into account, and the benefit will grow accordingly.

How long will NMFN waive premiums after the insured has recovered?

Under total recovery, the insured will have to resume premium payments.

Will NFMN waive the insured's elimination period if they recover and get sick or injured again for something unrelated to their prior claim?

Tricky. I know the elimination period is waived after it has been met the first time for a given claim, but as far as unrelated claims go...it's not like they have a new policy, so it should be waived.

How often can insured exercise FIO/GIO?

...never heard that terminology before. I don't deal with GLTD.

What is the maximum FIO insured can have on policy?

What's the latest date FIO can be exercised?

Will NMFN grant me an exception to their usual rules regarding FIO if I lose a GLTD plan?

Can I get a lifetime benefit rider with NMFN?

A lifetime benefit is paid when the insured has irrevocable loss of sight, speech, hearing, or the use of two limbs. Actually, the benefit is now retroactive at 150% of regular benefit due to recent changes.

I love the fact that you are asking me these questions, because it keeps me on my toes. To be honest, people don't know enough about the product to ask 90% of what you asked above, but it's information that needs to be known by the agent for any given circumstance.

What is FIO/GIO?