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Originally Posted by bluemarlin08
Whole life policies that are showing increasing premiums are typically policies that were designed with part whole life and part term ...
Whole life policies that are showing increasing premiums are typically policies that were designed with part whole life and part term insurance. The concept was that projected dividends would purchase paid up additions and replace the term insurance. The problem began when dividend projections were less than projected, therefor causing the policy to pay higher and higher costs for the term portion. This problem snowballs and eventually requires the policyholder to pay higher premiums. When one runs into an older WL policy with a term blend, in the majority of cases the policyholder is unaware of the potential time bomb they own.
It must still be a popular strategy. MassMutual recently brought out their Legacy 100 that has a LISR rider for term. Here is the description.
Legacy 100 Whole Life: Legacy 100 Whole Life is a permanent life insurance policy providing a guaranteed face amount. Premiums are payable to age 100. The duration of premiums for riders varies according to the terms of the rider. The policy provides for cash value accumulation and for the payment of dividends as may be determined by the Company.
Life Insurance
Supplement Rider
(LISR)
This rider provides additional life insurance coverage and premium flexibility. The death benefit is level, referred to as the Target Face Amount (TFA), and is selected by the policyowner at the time of application. The TFA is comprised of one-year term insurance and paid-up additions. Every year, rider premiums, less a premium expense charge and any applicable modal charges, and policy dividendsare used to purchase one-year term insurance, paid-up insurance additions or a combination of both to equal the TFA. The premium expense charge is currently equal to 8%of any rider premium, and is guaranteed not to exceed 10% of any rider premium paid in future years. The mix of term insurance and paid-up additions in the TFA changes each year. It is anticipated, but not guaranteed, that over time the amount of term insurance will decrease and the amount of paid-up additions will increase - until the crossover year. The crossover year is the point in time when the paid-up additional insurance death benefit is equal to the TFA and the purchase of one-year term is no longer necessary. The term charge rate schedule for the one-year term insurance coverage is not guaranteed. However, if each rider premium paid is at least equal to the rider's Completion Premium, the current term charge rate schedule will not change. Please refer to the LISR Information page for details and limitations.
There are "modified whole life's" that were sold by nyl. Typically the policy had a premium increase around year 15. Also some suvior whole lives had a premium step up.
There are so many variations of the product anymore the words "whole life" are used very loosely by the industry, which creates the problem of the blanket statements by financial "gurus" who don't take more than a few seconds (if at all) to learn about the subject.
Those NYL survivor policies that the premium doubled in year 15 are scary products. I worked a joint case 15 years ago with a NYL agent and he insisted we put a client in this product. He said NYL assured him dividends would be more than enough that this premium increase would never happen. I was totally against the policy and guess what, heard this week that the client received a notice for the new doubled premium. Live by the dividend projection and die by it.
There are "modified whole life's" that were sold by nyl. Typically the policy had a premium increase around year 15. Also some suvior whole lives had a premium step up.
There are so many variations of the product anymore the words "whole life" are used very loosely by the industry, which creates the problem of the blanket statements by financial "gurus" who don't take more than a few seconds (if at all) to learn about the subject.
Prudential had them too. Ran into one last week. She has been paying $40 monthly for 20-years and is schedualed to increase to $120 monthly on her next birthday (age 62.)
Prudential had them too. Ran into one last week. She has been paying $40 monthly for 20-years and is schedualed to increase to $120 monthly on her next birthday (age 62.)
That was a rude awakening. Did you sell her replacement coverage? There are way too many people who have policies like that that have no clue. The were sold UL or some type of doctored WL. Here is what is tragic, when the rate increase hits at age 62, age and health plus simply the cost of insurance at age 62 may preclude them getting any other coverage or at least the coverage that was desired and could have been affordable at age 42.
I think we should curb the outrage a bit as I would imagine that most agents who sold this policy also showed traditional wl. We all have clients with selective memmory or a thought process where they lock in on one thing and ignore the rest.
We can't always assume the agent did a wrong. Sometimes the client does distract themselves with the bright and shiny...
Maybe the client at the time thought "no problem" about 10-15 years ago most folks were on the gravy train.. things change.
There is a shared responsibility for some of the games played by carriers in this arena. The vanishing premium concept probably got the most play of any of the schemes. The surprising thing is it has carried over, but on a smaller scale, to the UL, VUL, ISUL, etc. market.
I can't say what they are doing now, but a few years ago a descendant of the A L Williams organization was illustrating 12% returns on VUL.
What is sad is that agents and carriers alike feel like they must use gimmicks to sell permanent life insurance. The product is designed to solve the problem of a permanent need. That's all.
But it has been bastardized into an investment vehicle.
As an investment, you would be hard pressed to find anything worse to show a client. Why agents insist on using perm life as a savings vehicle for college or retirement is beyond me. The ONLY saving grace is the forced savings component for people who otherwise lack the self discipline to save for their future. But that is not a strong enough argument in my opinion to justify the tricks used by agents to promote perm plans.
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