Hi, I have in the past believe in buy term, invest the difference and I am just starting in the insurance business.
Now that I'm reading and talking more with other agent about it, I'm not sure if I believe that anymore. However,
I thought I understand Whole life but I am getting more confuse now. Please clarify for me.
Some past posting I read:
"The basics of straight whole-life are still the same. The policy is designed to increase the cash value (self-insured amount) each year and reduce the coverage (insured amount) by the same number each year."
Another agent told me that whatever amount a cash value is will be added to the face amount so for eg, if it had a $100k face value and cash value is $50k, it will pay out $150k...
Okay when a person dies, what does it matter if the amount is on the cash value side or the insured amount side if it equals to the same amount.
Also, since taking out the cash value is taxable and you lose the death benefits if you do that, what advantage is it.
What I see that is convincing me that whole life can be better is because the premium remains the same and with term, once it expired, the premiums can jump alot instead of being locked in like whole life. However, I am in my mind still trying to justify the big price difference, if it is worth it.
Then last night, I go to this meeting and they are marketing their flagship product which is life Insurance company of the Southwest/National Life Group and it is the Index Equity Universal Life.
If anyone also wants to comment on the MOO, I'm thinking of going with them because they are not captive but in general does anyone know if their rates are more than NYL, Mass Mutual?
I need to decide today if I should train with Monumental or MOO. Now, I'm thinking maybe I should go with Monumental because all factors being the same. I wouldn't want to sell a higher priced insurance which is what I'm hearing regarding MOO and not be able to justify the price other than that it is a MOO product.
Hi, I have in the past believe in buy term, invest the difference and I am just starting in the insurance business.
Now that I'm reading and talking more with other agent about it, I'm not sure if I believe that anymore. However,
I thought I understand Whole life but I am getting more confuse now. Please clarify for me.
Some past posting I read:
"The basics of straight whole-life are still the same. The policy is designed to increase the cash value (self-insured amount) each year and reduce the coverage (insured amount) by the same number each year."
No. The "corridor effect" requires that the death benefit of the whole life insurance policy must increase in ratio to the increase in cash surrender value or it becomes a modified endowment contract with far different tax treatment. So the CSV increase does not replace the death benefit, it increases it proportionally.
So, a $500,000 whole life policy over 30 years might be as follows:
DB $787,000
CSV $220,000 or something like that.
As the CSV increases the DB must also increase under the corridor effect to remain a true life insurance contract. Most good WL contracts are designed properly to avoid overfunding or overloading which creates an endowment.
Originally Posted by insurancemet
Another agent told me that whatever amount a cash value is will be added to the face amount so for eg, if it had a $100k face value and cash value is $50k, it will pay out $150k...
No, it is one or the other, not both. A $100,000 death benefit policy will pay $100,000 out on the death of the insured, nothing will be paid out of the CSV. See my example above about how CSV increases will raise the overall death benefit, but even in that scenario only the DB is paid out upon death of the insured, not both.
Originally Posted by insurancemet
Okay when a person dies, what does it matter if the amount is on the cash value side or the insured amount side if it equals to the same amount.
If the payout came from an equalization of the cash value side to the insured side, it would be a MEC and taxable on payout. That is never what you want to create. Payout needs to come from the insurance side to escape taxes and penalties.
Originally Posted by insurancemet
Also, since taking out the cash value is taxable and you lose the death benefits if you do that, what advantage is it.
Depends. If the CSV is less than the premiums paid in, there is no taxable event. If any of the CSV is in excess of premiums paid in, that portion is only would be taxable. If anything less than the full CSV is withdrawn it becomes complicated. If done as a loan, no tax consequences but interest charges apply. If a partial surrender, then it is going to depend on whether the amount of CSV surrendered is more or less that the premiums paid.
Originally Posted by insurancemet
What I see that is convincing me that whole life can be better is because the premium remains the same and with term, once it expired, the premiums can jump alot instead of being locked in like whole life. However, I am in my mind still trying to justify the big price difference, if it is worth it.
Whole life is coverage for one's "whole life" in other words it is permanent. Term is for a term or period of time. It all depends on the needs of the insured. Often a combination of the two is an appropriate solution--term to cover the big temporary need and whole life to cover any needs that do not have a finite time frame.
Originally Posted by insurancemet
Then last night, I go to this meeting and they are marketing their flagship product which is life Insurance company of the Southwest/National Life Group and it is the Index Equity Universal Life.
UL is another animal completely. It has a lot of moving parts and can be constructed in various ways that neither term nor whole life feature.
Originally Posted by insurancemet
If anyone also wants to comment on the MOO, I'm thinking of going with them because they are not captive but in general does anyone know if their rates are more than NYL, Mass Mutual?
I need to decide today if I should train with Monumental or MOO. Now, I'm thinking maybe I should go with Monumental because all factors being the same. I wouldn't want to sell a higher priced insurance which is what I'm hearing regarding MOO and not be able to justify the price other than that it is a MOO product.
'
You really need to get with a company that can properly train you on life insurance. I don't believe that a brokerage contract with MoO or a contract with Monumental are going to be in your best interests if you want to be a knowledgable, MDRT level life producer. The other carriers can train you far better in all of the life insurance areas.
Hi Dave, Wow, thanks so much for your response!
For the whole life, I guess I still don't see then the advantage of cash value. In the end, when a person dies, it doesn't matter then this part right....
"So, a $500,000 whole life policy over 30 years might be as follows:
DB $787,000
CSV $220,000 or something like that"
Because as you said a $100k will pay $100k at the time of death. Technically, it doesn't matter what the cash value is. Sorry, okay , I really need to study this.
As far as getting better training from other carriers, which ones are you referring to? The NYLiFe, MassLife? How about Guardian Life, I just looked them up on the internet.
I guess aside from training, I realize that most of my first customers will be families and friends so I really don't want to sell them a whole life from MOO if I can't justify the higher price side of it. It would be better in their interest for me to sell them the Monumental Life. At this point, I really only have those 2 to choose from because I don't want to go captive. NY Life is captive, I've interviewed with them , so is Metlife. Mass Mutual, I've contacted them , we played phone tags so many times, we both gave up.
Hi Dave, Wow, thanks so much for your response!
For the whole life, I guess I still don't see then the advantage of cash value. In the end, when a person dies, it doesn't matter then this part right....
"So, a $500,000 whole life policy over 30 years might be as follows:
DB $787,000
CSV $220,000 or something like that"
The cash value pushes the death benefit up. With term, and often UL, the $500,000 is still $500,000 30 years later. No inflation adjustment. With my example above, the death benefit has increased so inflation has not eroded the final payout. Also, with a good participating whole life contract, the dividend may exceed the premium and can be used to pay the premium in lieu of paying out of pocket for it. OR, the client could say "ok, the $220,000 cash value buys me a paid up forever $350,000 policy which will continue to grow with no further premiums due, I'll take that option". Or he could take the $220,000 in cash or 1035 exchange to an annuity (which would also have a death benefit) and call it a day. Lots of options available there, compared to term which is only one option, pay the premium or die.
Originally Posted by insurancemet
because as you said a $100k will pay $100k at the time of death. Technically, it doesn't matter what the cash value is. Sorry, okay , I really need to study this.
At that point, no it really does not matter. But the example is flawed. $100,000 death benefit whole life with a cash value of $50,000, the death benefit would likely have risen to a much higher amount because of the corrider effect, maybe $250,000 or more. There is the extra payout created by the cash value that you won't get from a term policy. $100,000 term is never going to pay more than $100,000 even if held for 30 years. $100,000 whole life on a good performing participating policy is going to pay out way more than the original $100,000 death benefit if held for 30 years, maybe 3 or 4 times the original death benefit.
Originally Posted by insurancemet
As far as getting better training from other carriers, which ones are you referring to? The NYLiFe, MassLife? How about Guardian Life, I just looked them up on the internet.
I guess aside from training, I realize that most of my first customers will be families and friends so I really don't want to sell them a whole life from MOO if I can't justify the higher price side of it. It would be better in their interest for me to sell them the Monumental Life. At this point, I really only have those 2 to choose from because I don't want to go captive. NY Life is captive, I've interviewed with them , so is Metlife. Mass Mutual, I've contacted them , we played phone tags so many times, we both gave up.
Friends and family are likely term cases maybe with a small amount of whole life. Or universal if you can make it fit and don't muck it up too bad (be careful, UL in the wrong hands can be a disaster. I have seen policies set to colapse at age 90, stuff like that).
Try Northwestern Mutual as well. Captive is a great place to learn both products and markets. If you go independent right off of the bat you will spend your career getting blown out of the water on every case that could earn you more that a thousand bucks.
Hi Dave, I just finished reading your response to my other threads, now I know which companies your speaking of. I know I decided not to go with NY Life because they are captive. I may check out Mass again but from what I read it looks more like a financial agent where you would also need to get your series 6 etc. Now I think I was wrong. Thanks again, whole life, what you shared , see above, sorry, I found confusing.
It depends on the type of whole life insurance sold. Some policies add the cash value to the death benefit to calculate the entire worth of the policy at passing - these plans are typically more expensive. Others do not.
Really, term, whole, or universal will all be good policies based on the particular situation. You don't buy term with the idea of converting it to whole life once the term has expired. In that case, you might purchase both term and a smaller whole life policy.
Universal Life can be difficult in the long run. Most of the policies I have seen are long on promises and short on coverage as they grow older. They simply don't live up to their illustrations - especially when the internal engine (variable, indexed, or fixed) is not preforming well.
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A.M. Hyers
Hyers and Associates, Inc.
It depends on the type of whole life insurance sold. Some policies add the cash value to the death benefit to calculate the entire worth of the policy at passing - these plans are typically more expensive. Others do not.
Really, term, whole, or universal will all be good policies based on the particular situation. You don't buy term with the idea of converting it to whole life once the term has expired. In that case, you might purchase both term and a smaller whole life policy.
Universal Life can be difficult in the long run. Most of the policies I have seen are long on promises and short on coverage as they grow older. They simply don't live up to their illustrations - especially when the internal engine (variable, indexed, or fixed) is not preforming well.
Yes, but people should think of no-lapse UL as less often lapse UL
Keep paying those bills and they shouldn't have any issues....we've yet to have a client with a no-lapse UL actually fall off the books for non-payment.
Hi Dave, I just finished reading your response to my other threads, now I know which companies your speaking of. I know I decided not to go with NY Life because they are captive. I may check out Mass again but from what I read it looks more like a financial agent where you would also need to get your series 6 etc. Now I think I was wrong. Thanks again, whole life, what you shared , see above, sorry, I found confusing.
Insurancemet the companies that provide training by and large are going to be captive companies. It does not make sense for a company to invest lots of time training an agent who will not sell their product.
However the other thing about companies like NYL,MET etc they normally have a GA built into the mix meaning you can get access to other products besides just selling MET or NYL just realize that those companies are going to expect a certain amount of sales be of proprietary products.
You may wish to look into one of these companies for a few years to start to really understand what your selling. Not only do you need to understand the products but also how to use them in more complex setting such as key man insurance, buy sell agreements etc and these companies can provide that training.
Thanks Peter, that's why I was looking into Monumental and MOO, because these were the 2 companies I found that is willing to train and not be captive.
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Ps, still having a hard time trying to decide between the 2, in general do you think Monumental Life is a better buy considering all the benefits etc is the same. I mean better pricing.
Last edited by insurancemet : 06-12-2009 at 11:02 PM.
Reason: Posts merged
Forgive me if this seems a bit harsh but you appear to lack any knowledge or education in finance - what research have you done on your own to find a company that will both pass rigorous financial inspection and offer products that meet your clients needs - neither company you mention would pass my specifications at all - most in the business put the cart before the horse and believe the marketing put out by so many companies and the industry in general.
First, analyze the company's balance sheet and filings; then,
Learn why IRR (internal rate of return, ROE (return on equity) and ROI (return on investment) coupled with analysis of risk are critical if you are doing the right job when advising people of where to put money - to give you an idea of howimportant this is, there are only 3 companies who meet my specs for whole life insurance
Life Insurance is not confusing - like everything else, just break it down into its components and study each.
Saying that because a premium is higher it is a bad choice is like saying using and payhing for Moboil1 synthetic motor oil is a mistake because it costs 3 times regular oil - wrong - for many reasons starting with the need to change sytnthetic oil is about every 15,000 miles versus 3,000 miles for regular motor oil - hope you get the idea.
First, analyze the company's balance sheet and filings; then,
Learn why IRR (internal rate of return, ROE (return on equity) and ROI (return on investment) coupled with analysis of risk are critical if you are doing the right job when advising people of where to put money - to give you an idea of howimportant this is, there are only 3 companies who meet my specs for whole life insurance
MALinehan mar@mal-tlg.us
Just curious, given your method of analysis, which three companies?
Unless there have been recent changes, I don't think you can be non-captive with Monumental and receive training unless it's from a broker. Monumental works on the agency system in which you're assigned a book of business. You'd probably be doing good to get much training going that route with them anyway, although as with every company, which office you work out of and who your manager is makes a big difference.
They just recently created a new contract..independent p/t agent although, you don't get a book, they will still fully train you. Do you have any opinion regarding whether MOO is better to go with or Monumental, are you familial with their products, do you know if their pricing is competitive and if their products are good as well?
I'd like to share something that helped me understand something about life insurance. Whether it's whole life, universal life, variable life, equity indexed universal life, or term life, the rates are all based on annual renewable term (ART). Every year as we get older we're one year closer to death, so the price of the ART goes up. I'm no actuary but I know they use a formula to figure out the cost of ART for the length of the coverage and also factor in things like overhead, commissions, profit, etc. Then they come up with an amount to keep the premiums level, also calculating in their expected rate of return on the excess money above the ART rate to cover the costs I just mentioned and others. So if we take a 10 year term policy obviously we'll be paying more than the ART cost the first year but by the 10th year we'd actually being paying in less than the true ART premium at that point. The same applies with a whole life policy. Since it's designed to last to typically age 100 the total ART costs over the length of the policy will be a lot more than a 10 year level term policy, so they have to charge a lot more up front, which is calculated to keep the premiums level and affordable later on in life. I know this is an over simplification, but it helped me understand it better and really takes away the argument over which one is better. The real question is how long are the needs to be covered. Temporary say 10, 20, 30 years then term my be the best fit. Permanent need for final expenses, estate taxes, ongoing family income, then whole life would be a better choice.
Salem, I think you missed the point. He doesn't want us to actually explain whole life or any part of life insurance to him. There are apparently only two companies that will even talk to him, Monumental and MoO. He has apparently decided he likes Monumental better for some reason and wants us to justify his decision for him. That way he will feel better, and if he fails he can blame us for his failure.
Whole Life Getting More Confuse
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