LIFE INSURANCE

[Yo ssi]

Can you explain? What happens after 30 years? He will pay a lot more?

Either way he'd be paying more as it converts to a whole life policy.
I'm assuming some plans are better than others and William Penn doesn't have any good offerings.

@ExGingi what is an alternative with a decent conversion option?

[EliJelly]

32 year old male in good health BH. Frum broker got me william Penn (I think that's banner life) at $700 a year for 30 year term with conversion, for a $1M policy.
Does this make sense?

Isn't $1M too little? You can get a $2M policy for 20 year term for under $1k. Question is when one's limit is lets say $1k for term policy should he go for $2M or for longer term and less. I personally went with the second option for me and wife with conversion. (MM and Guardian)

[yr]

I'm trying decide if I should hold on to a small whole life policy.

It's a NYL whole policy with 150k face value.

I don't need the insurance- I have a much larger term policy.

The return looking at the guaranteed cash value seems pretty bad. I'm at year 5 of the policy and going forward, the guaranteed cash value increases by roughly my premium amount. This past year the cash value increased to a tad more than the guaranteed amount.

I'm thinking this is a poor tool for savings and I don't need the insurance.

Anyone know if that makes sense?

[Yosel]

I'm trying decide if I should hold on to a small whole life policy.

It's a NYL whole policy with 150k face value.

I don't need the insurance- I have a much larger term policy.

The return looking at the guaranteed cash value seems pretty bad. I'm at year 5 of the policy and going forward, the guaranteed cash value increases by roughly my premium amount. This past year the cash value increased to a tad more than the guaranteed amount.

I'm thinking this is a poor tool for savings and I don't need the insurance.

Anyone know if that makes sense?

Why don't you need the insurance?

if you really don't need insurance, why the term policy?

[yr]

Why don't you need the insurance?

if you really don't need insurance, why the term policy?

I mean that I don't need the 150k whole life since I have a much larger term policy.

[nucheiner]

I'm trying decide if I should hold on to a small whole life policy.

It's a NYL whole policy with 150k face value.

I don't need the insurance- I have a much larger term policy.

The return looking at the guaranteed cash value seems pretty bad. I'm at year 5 of the policy and going forward, the guaranteed cash value increases by roughly my premium amount. This past year the cash value increased to a tad more than the guaranteed amount.

I'm thinking this is a poor tool for savings and I don't need the insurance.

Anyone know if that makes sense?

If you don't mind, can you explain to the audience why you purchased the $150k whole life policy to begin with? Just so others can understand the steps you took.

[ExGingi]

I mean that I don't need the 150k whole life since I have a much larger term policy.

And what will you have when the term expires?

I'm trying decide if I should hold on to a small whole life policy.

It's a NYL whole policy with 150k face value.

I don't need the insurance- I have a much larger term policy.

The return looking at the guaranteed cash value seems pretty bad. I'm at year 5 of the policy and going forward, the guaranteed cash value increases by roughly my premium amount. This past year the cash value increased to a tad more than the guaranteed amount.

So using some rough assumptions, let's say your annual premium for the Whole Life policy is $1,800/yr (IDK how old you were when you purchased it, and what riders are on the policy). I would really hope that you have an active OPP rider (NYL's name for a Paid-Up Additions rider).

Using the above assumption, 5 years in you paid around $9,000 and your cash value is probably around $4,000. That is $5,000 sunken cost. If you cancel now, it is a loss. It is probably the worst time to cancel.

Going forward, your cash value seems to be increasing every year by at least your premium amount. Your cash value would probably break even with your total premium outlay around year 14.

As for the return on the cash value going forward, in the current interest rate environment it is less than you can get on a Money Market account or a 26 week T-Bill, but for the last 15 years or so it was much higher than those. I don't think the current interest rate inversion will stay around long term. It might be another 12-18 months, but the curve will eventually normalize.

The cash value in the Whole Life policy is equity that you can borrow against at any time with no credit application and doesn't show up on your credit report. You never know when it will come in handy.

[yr]

But I need to keep paying 1400 a year. Why wouldn't I put the 1400 somewhere else. And why I bought the policy to begin is another question.

I can put 1400  a year under my mattress and keep up with the guaranteed cash value, at least for a good 20 years.

[yr]

If you don't mind, can you explain to the audience why you purchased the $150k whole life policy to begin with? Just so others can understand the steps you took.

A pushy salesman? Idk. I thought it was a decent diversification but I'm fully rethinking that.

[ExGingi]

I can put 1400  a year under my mattress and keep up with the guaranteed cash value, at least for a good 20 years.

Factually untrue.

I obviously have nothing to gain or lose by you keeping or dropping the policy. But you obviously don't understand what you have and how it works.

The bottom line according to your description is that for the "lost opportunity cost" of doing something else with the $1,400 you are getting at least $150,000 of PERMANENT death benefit. IDK if you have a Disability Waiver of Premium on your policy, if you do, that definitely has some extra value. And the bottom line at this point is that any money you put in going forward, is available to you as lifetime equity in the policy, which you can leverage at any time.

[avromie7]

A pushy salesman? Idk. I thought it was a decent diversification but I'm fully rethinking that.

A LI salesman once told me that he was told to always try to get the client to take at least some WL, even if it's just a small amount so they can't leave.

[ExGingi]

A LI salesman once told me that he was told to always try to get the client to take at least some WL, even if it's just a small amount so they can't leave.

Everything is possible, but I never heard that line in my years in the industry.

[yr]

Factually untrue.

I obviously have nothing to gain or lose by you keeping or dropping the policy. But you obviously don't understand what you have and how it works.

The bottom line according to your description is that for the "lost opportunity cost" of doing something else with the $1,400 you are getting at least $150,000 of PERMANENT death benefit. IDK if you have a Disability Waiver of Premium on your policy, if you do, that definitely has some extra value. And the bottom line at this point is that any money you put in going forward, is available to you as lifetime equity in the policy, which you can leverage at any time.

So I probably don't understand.

I attached the guaranteed values page.

From today until year twenty I'll put in 21,000, and my cash value will increase by 20,000.

Yes, I'll have 81,000 of RPU insurance,  but that's a lot of money for that. And it's also a fraction of the amount of insurance I'll need then. meaning I'll forsure need to have significant term to supplement,  as I do now.

What am I missing.

[ExGingi]

So I probably don't understand.


What am I missing.

Are any riders included in the $1,400 premium (I would guess that at least Disability Waiver of Premium is there, if you had a good agent).

Ask for an in-force illustration to see how the policy works. These policies are designed to outperform the guarantees. And if you have money going into the PUA (OPP is what NYL calls it) rider, there are more guaranteed values there.

[yr]

Yes, I do have a disability waiver.

Year 5, this year the first time it outperformed the guaranteed by just a drop.

I'll ask.

Thanks for your responses!

[ExGingi]

Year 5, this year the first time it outperformed the guaranteed by just a drop.

Expected.

The first years WL looks terrible, it's when it is fully seasoned (company upfront costs recovered) that it starts to shine.

Obviously, larger policies shine brighter.

[yr]

Expected.

The first years WL looks terrible, it's when it is fully seasoned (company upfront costs recovered) that it starts to shine.

Obviously, larger policies shine brighter.

How far is fully seasoned and when you say shine brighter, are the rates of return actually higher, or just proportional to the face value?

[skyguy918]

That table is almost certainly without any dividends.

[aygart]

That table is almost certainly without any dividends.

It says so right on top.

[yr]

That table is almost certainly without any dividends.

Correct.

Is there a way to predict dividends?

Year 4 was $12 and year 5 $17.