Considering a Whole Life Policy

[LGilmore]

I'm heading to Mardon at Potholes on Sunday, be there all week boat camping. Let me know and you can grab a ski or tube.

The rider for guaranteed insurability or even a term rider is a good idea.
Doing either you simply take away an insurance company's ability to tell you NO. There's a lot to be said about that feeling. Likewise the Whole life option. It's expensive for a reason, it takes away the insurance carriers option to say no later. A big reason I have what I have is taking away that option from the insurance company. Same goes for DI. I don't know NWM's DI but I know mine is very solid and the plan I put in place for my son (doctor) is rock solid.

 

[Mattschmidt]

If you do want a Whole Life policy, there are better carriers than Northwestern Mutual....

 

[VolAgent]

IRA's and annuity's......

As long as they are in fixed products.

 

[BNTRS]

Oh we love these threads don't we?

Am I the only one who is going to publicly point out the irony behind an accountant (a CPA no less) who is not only looking to buy life insurance, but WHOLE LIFE insurance? Did you miss the WL is the devil section of the CPA study material?

I have a few questions I would address with your agent prior to moving forward:

1. Does 75k get you the best underwriting class. I've been told both yes and no concerning NML. I know most companies will give you standard at best if db is < 100k.

2. Check on the guaranteed increase option, the rider that lets you buy more coverage w/o proving medical insure-ability. My understanding was that NML capped it at the issued face amount. I know 150k is their max, but ensure that you can exercise $150k or if you are maxed out at $75k b/c of your initial issue amount.

3. Does NML allow you to express an increase option (we'll call that rider mentioned above a GIO or guaranteed increase option because it's a lot easier to type in reference that way) GIO for certain life events (e.g. new job/salary increase, marriage, birth of a child, etc)? I know you said you didn't have plans on getting married or having kids, but these things have away of happening unplanned.

4. Are you using Paid up Additions (PUA) on this policy (essentially the ability to put extra money into the policy as you have it)? And don't confuse this with the dividend option to purchase PUA's.


The use of term insurance with a WL policy is a good strategy. I especially like "blending" the two. It increases the Modified Endowment Contract limits on the policy and the term db gets replaced with WL db over time.

As for the question concerning 100k db vs. a less amount. On a WL policy dividends are often "banded" based on db. This means you'll receive better dividend treatment at higher death benefits. You'd have to ask to get the details on where these dividend bands are. These bands tend to vary a lot company to company. I know of at least one that has bands around 100k and 500k and another that doesn't start a new band until you hit a million in db. It's not usually a gigantic difference, but worth noting.

As far as something you might be missing. I'd at least look more into blending this with a lot of term insurance rather than worrying much about the GIO. This will give you the flexibility of putting more cash towards this as you get old and have more income, while having a death benefit that suits you well now and in the future.

 

[xrac]

Uh... no. You can purchase additional coverage without needing to re-qualify medically at the current underwriting classification based on your age at that time. So, it's based on your age, not necessarily the current rate at your age of 27.



I would consider getting an additional term insurance rider to increase your face amount of coverage.

This serves 3 purposes:
1) Locks in your insurability at a higher amount
2) You can convert that term over time to more whole life coverage. (Your income will be going up as a young CPA, right?)
3) More appropriate death benefit coverage should you get married and start a family.

Just something else to consider.

Term riders are usually pretty competitive and blended policies are very common.
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there are better investments........

Mostly with much greater risk. Have you ever read Missed Fortune or LEAP: Lifetime Economic Acceleration Progress?
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If you do want a Whole Life policy, there are better carriers than Northwestern Mutual....

My personal coverage is with Guardian and the policy has performed well.

 

[Chuckles21]

Here is my advice,

If you can buy a bigger policy right now, do it. If you purchase the policy in question you will be very happy as it is with a very strong company with very strong policy performance. So do it and be happy. Don't let all of these people make you doubt doing something that will benefit you.

The one thing I might change is taking out the APB (Additional Purchase Benefit) and instead just have the agent write you a $300-$500k term companion policy. The cost is essentially the same as the rider and it is more flexible in the fact that you can convert portions or the whole term to permanent at any time in the convertibility period no questions asked. With the APB rider you can only do $150k each time and only do it every 3 years. Again you are not going to go wrong just keeping the APB on the policy but in my mind this is more flexible.

1. Does 75k get you the best underwriting class. I've been told both yes and no concerning NML. I know most companies will give you standard at best if db is < 100k.

Not an issue he can get premier at 75k

2. Check on the guaranteed increase option, the rider that lets you buy more coverage w/o proving medical insure-ability. My understanding was that NML capped it at the issued face amount. I know 150k is their max, but ensure that you can exercise $150k or if you are maxed out at $75k b/c of your initial issue amount.

Default is twice the death benefit amount up to $150k max. So if he does the $75k policy every option would be for $150k. So you are correct on the max but incorrect as far as the face amount.

3. Does NML allow you to express an increase option (we'll call that rider mentioned above a GIO or guaranteed increase option because it's a lot easier to type in reference that way) GIO for certain life events (e.g. new job/salary increase, marriage, birth of a child, etc)? I know you said you didn't have plans on getting married or having kids, but these things have away of happening unplanned.

Yes, they do. For marriage and birth/adoption of a child.

4. Are you using Paid up Additions (PUA) on this policy (essentially the ability to put extra money into the policy as you have it)? And don't confuse this with the dividend option to purchase PUA's.

Probably not in a 65L policy as it is essentially maxing out premiums already

The use of term insurance with a WL policy is a good strategy. I especially like "blending" the two. It increases the Modified Endowment Contract limits on the policy and the term db gets replaced with WL db over time.

I like this strategy a lot as well but for the amount he is putting in I would stick with what his agent is suggesting.

As for the question concerning 100k db vs. a less amount. On a WL policy dividends are often "banded" based on db. This means you'll receive better dividend treatment at higher death benefits. You'd have to ask to get the details on where these dividend bands are. These bands tend to vary a lot company to company. I know of at least one that has bands around 100k and 500k and another that doesn't start a new band until you hit a million in db. It's not usually a gigantic difference, but worth noting.

As far as I know the more you put in/more death benefit the more efficient the contract will perform. As far as going up to $100k vs. $75k. The $100k will perform slightly better but so would $125k over $100k. So as far as banding goes I don't think it necessarily applies as you are thinking here but I will say that the bigger the policy the better performance.

 

[BNTRS]

Probably not in a 65L policy as it is essentially maxing out premiums already

Maybe, but this is one of those things that I hesitate over. I'm not super crazy about paid up at age 65 policies. The best one I'm aware of is ONL's Prestige Max since it truly is just about MEC limit premium, definitely builds serious cash, and uses a preferred NDR loan that is truly something special in the NDR vs. DR debate.

As far as I know the more you put in/more death benefit the more efficient the contract will perform. As far as going up to $100k vs. $75k. The $100k will perform slightly better but so would $125k over $100k. So as far as banding goes I don't think it necessarily applies as you are thinking here but I will say that the bigger the policy the better performance.

Define "efficient." I can build a policy with a lower base db to out-perform net db and net CSV. All WL policies that I've looked at use dividend banding. I almost thing this might be something that can be looked at in Full Disclosure, but I'm on MAC right now, so I can't open it to look.

 

[DHK]

but I'm on MAC right now, so I can't open it to look.

Another vote for a Windows PC! (Sorry, didn't mean to derail the thread.)

 

[Chuckles21]

Maybe, but this is one of those things that I hesitate over. I'm not super crazy about paid up at age 65 policies. The best one I'm aware of is ONL's Prestige Max since it truly is just about MEC limit premium, definitely builds serious cash, and uses a preferred NDR loan that is truly something special in the NDR vs. DR debate.

I checked and you can add AP's to the 65L but you can't overdo it for to long.

Define "efficient." I can build a policy with a lower base db to out-perform net db and net CSV. All WL policies that I've looked at use dividend banding. I almost thing this might be something that can be looked at in Full Disclosure, but I'm on MAC right now, so I can't open it to look.

By efficient i meant have a better IRR and I was only talking about NML's 65L in this case.

 

[jdrose]

I checked and you can add AP's to the 65L but you can't overdo it for to long.

Is this because the 65L plan is not blended? I recently received a 65L illustration and from what I understand, the death benefit on the 65L plan is only whole life, with no blended term. Thus, the possibility of paying up additions are limited.

(I may be totally off. I am not an agent, just an engineer turned attorney that has done tens of hours of due diligence in trying to understand the enigma that is whole life insurance.)

**EDIT - that was a big step. First post after scouring these forums for the past 2 months.