Whole Life Advice

[johnyblu]

Thanks in advance for your time.

I'm a 27 year old looking for a whole life policy. My reasons for getting one is four-fold: 1)i like the tax-free benefit and feel this can be the cash part of my portfolio (i know I can't touch for first number of years) and grow much quicker than my savings account would; 2)guaranteed death benefit; 3)disability benefit; 4)locks in health rating now

I have a significant amount sitting in cash right now, so I was thinking it makes sense to start this year, max my PUAs for the next few years and then when I'm in low 30s I'll hopefully be at a point where the dividends will be self funding. So at that point in case i look to buy a house or something, I'll have option to not pay premiums each year but still have the policy in place and growing.

Here are my questions:

a) I'm thinking it makes sense to get one of the big 4 since why not get best rated company when i'm in good health - should I be considering 2nd tier companies like Penn Mutual?
b) how much should I be focusing on benefits like own oc, borrowing costs, direct recognition and the like? Is there a comparrison of the benefits between the 4 companies somewhere?
c) I'm leaning towards Guardian - any reason I shouldn't?

Thanks,
Johny

 

[moonlightandmargaritas]

Who is the beneficiary?

 

[johnyblu]

Let's say wife - but does it matter?

 

[moonlightandmargaritas]

Let's say wife - but does it matter?

It matters a lot. If you need the insurance, it's worth considering. If you (actually your beneficiary) don't need the death benefit, you're wasting an awful lot of money.

 

[johnyblu]

can you elaborate? It looks like the IRR on the cash after 10 years sticks in the 5% range tax free, plus you get the disability insurance and a death benefit as well if god forbid something happens (then your IRR skyrockets). As the cash value can be borrowed against, I'm comparing the 5% IRR to my savings account, not my investments. So doesn't seem too expensive - but I'm looking for the best company to use in my scenario (age 27, maxing PUAs for first bunch of years). thanks

 

[LGilmore]

Moon and I disagree on this one. If you can swing it now, why not go for it? Later when you will need it, it's inplace at a price that is low.

It is what I did and it worked for me. I look at it like buying a piece of property that I will later put my house on and raise a family.

Over the years I have had it I have gone from a bad ass rugby player who purchased preferred best to a 50 year old man who's been a hypertensive diabetic for a decade. If I could get insurance today, even term, it would be 10 times what I paid back then for the coverage I purchased with my excess funds.

To clarify, I also invested in other things during the same period of time. Recent market years have made me appreicate that my WL cash values didn't go backwards.

couple of things to think about. If you're going to "pop" a policy, you pretty much have to leave it alone. If an agent tells you that you can premium offset AND take the cash values.... no, you really can't. If you're going to pop, you've went the cheapest lifetime policy route. But it's not a bank at the same time, you have to keep funding it. That said, in my 20th year my cash value increase was 2.5 greater than the premium paid that year.

Get yourself some real disability insurance so you can continue your plans if your health gets in the way.

 

[TRSecurity]

A few quick questions -

Are you maxing out your IRA's, 401k match, SEP and/or other investment options?

Are you looking at this insurance policy as alternative place to put money or is this an additional place to put money because everything else is taken care of?

As already posted, does your beneficiary need the death benefit?

Have you considered an indexed universal life?

It's always nice to see someone your age who is exploring the potential of life insurance. I hope you find the information you are looking for.

 

[dgoldenz]

Thanks in advance for your time.

I'm a 27 year old looking for a whole life policy. My reasons for getting one is four-fold: 1)i like the tax-free benefit and feel this can be the cash part of my portfolio (i know I can't touch for first number of years) and grow much quicker than my savings account would; 2)guaranteed death benefit; 3)disability benefit; 4)locks in health rating now

I have a significant amount sitting in cash right now, so I was thinking it makes sense to start this year, max my PUAs for the next few years and then when I'm in low 30s I'll hopefully be at a point where the dividends will be self funding. So at that point in case i look to buy a house or something, I'll have option to not pay premiums each year but still have the policy in place and growing.

Here are my questions:

a) I'm thinking it makes sense to get one of the big 4 since why not get best rated company when i'm in good health - should I be considering 2nd tier companies like Penn Mutual?
b) how much should I be focusing on benefits like own oc, borrowing costs, direct recognition and the like? Is there a comparrison of the benefits between the 4 companies somewhere?
c) I'm leaning towards Guardian - any reason I shouldn't?

Thanks,
Johny

Are you talking about buying whole life and then a separate disability policy, or talking about a disability waiver? Guardian is a great company. If you don't have a true disability policy right now, I'd buy that before buying whole life. You've got 30-40 years until retirement, that's a lot of potential lost income if you became truly disabled. Just my opinion.

 

[DHK]

A few quick questions -

Are you maxing out your IRA's, 401k match, SEP and/or other investment options?

Are you looking at this insurance policy as alternative place to put money or is this an additional place to put money because everything else is taken care of?

As already posted, does your beneficiary need the death benefit?

Have you considered an indexed universal life?

It's always nice to see someone your age who is exploring the potential of life insurance. I hope you find the information you are looking for.

You post interesting questions. It also shows your lack of knowledge on some of these subjects.

Are you maxing out your IRA's, 401k match, SEP and/or other investment options? Why does this matter when someone is considering a life insurance purchase?

Also, all those account structures are based on tax-deductible savings now, for a unknown taxed withdrawal rate in the future.

"Does the beneficiary NEED the death benefit?" Life insurance has NEVER been about "needs" but about what you WANT for others - especially if they are dependant upon your economic value for their support.

Have you considered an indexed universal life? Have you seen the GUARANTEES of IUL or UL or any other kind of "unreliable life" policy? Why would someone so young with their cash flow ever consider buying a UL policy?


This line of thinking in this post is one reason why agents aren't selling as much life insurance and the public hasn't been buying more either. You keep adding the foundation after you bought the furniture! Life insurance is about having a stable, secure foundation for the rest of someone's life.

Now, should he be buying PUA riders in the policy? That depends on how we wants to USE the policy during his living years. "Paying it up" sooner? Use as an "infinite banking" scenario? Use for a future business buy/sell agreement and have cash reserves for such a business?

Life insurance is like a swiss army knife. Too many uses and not enough people who know how to use it.

 

[BNTRS]

You're asking a lot of detailed questions that either means you've spent a lot of time looking into this, or someone is trying to get the old ball rolling, again.

You're idea is sound, and there are many benefits to owning permanent life insurance at your age. I would likening to bonds, and not so much cash, it'll yield higher than cash.

As has also been stated, disability insurance is hugely important. It baffles me that that's one thing we agents/advisors all agree on, yet seems to be the piece of advice that gets followed the least.

The big four are a great place to look, but I'd advise against Northwestern Mutual and New York Life.

Non-Direct recognition is more of a marketing gimmick, the insurance company isn't going to magically give away money. Non-direct companies have variable interest rates on loans, and lag in dividend rates as interest rates increase, (they have to in order to make up for the potential of heavy loans taken to be used in other interest based investments/savings vehicles).

I've never found anything WL wise at Penn Mutual that I was wildly in love with. We have a regular contributor here who has been very publicly in support of Penn Mutual though.

Guardian is a great choice, lot's of great features and available flexibility with them. I do a fair amount of business with Guardian. But I would also take some time to look at Massmutual. The one caveat to Mass is their rather high charge assessed on Paid up additions.

If you're truly looking at ways to maximize cash in the policy, I'd direct you to 10 pay whole life insurance, especially at Guardian, you'll get a ton of flexibility with paid up additions.