Switching from Metlife Paid at 98 Policy

[adefina]

Back in the 90s, my mom purchased a Metlife whole life policy and was promised there would be no more premiums after 10 years or so. Almost 30 years later, she's still paying a yearly $3000+ premium for a "paid at 98" policy.

I asked around about this and Citibank advised that we switch the policy with another one that has the same coverage, but at a cost of an extra $10,000. Does it make sense to do this? My mom is 64 this year and in good health. I would guess that the extra 10k is better than paying 3k every year for quite possibly 10-30 years, right?

 

[AboutThatLife]

Back in the 90s, my mom purchased a Metlife whole life policy and was promised there would be no more premiums after 10 years or so. Almost 30 years later, she's still paying a yearly $3000+ premium for a "paid at 98" policy.

I asked around about this and Citibank advised that we switch the policy with another one that has the same coverage, but at a cost of an extra $10,000. Does it make sense to do this? My mom is 64 this year and in good health. I would guess that the extra 10k is better than paying 3k every year for quite possibly 10-30 years, right?

What state are you in?

 

[WinoBlues]

Back in the 90s, my mom purchased a Metlife whole life policy and was promised there would be no more premiums after 10 years or so. Almost 30 years later, she's still paying a yearly $3000+ premium for a "paid at 98" policy.

I asked around about this and Citibank advised that we switch the policy with another one that has the same coverage, but at a cost of an extra $10,000. Does it make sense to do this? My mom is 64 this year and in good health. I would guess that the extra 10k is better than paying 3k every year for quite possibly 10-30 years, right?

What did Met Life say?

 

[Norwayguy]

What did Met Life say?

+1 What does the existing policy show 30 years into a whole life policy should be strong.

 

[pfg1]

+1 What does the existing policy show 30 years into a whole life policy should be strong.

No doubt. If you can post up the details of the policy you can probably get some solid answers. Most likely that policy is performing extremely well... you'd probably be crazy to replace it.

What is the primary purpose for the policy?

I'm guessing you could do an RPU and end the payments, assuming the death benefit meets her goals.

 

[scagnt83]

I asked around about this and Citibank advised that we switch the policy with another one that has the same coverage, but at a cost of an extra $10,000. Does it make sense to do this? My mom is 64 this year and in good health. I would guess that the extra 10k is better than paying 3k every year for quite possibly 10-30 years, right?

What reason did Citibank give for recommending the replacement? Did it make sense?

A recommendation without an explanation is never a good sign. If they did explain it to you, did what they say make sense?

 

[Deepsea]

I have a MetLife 98 also that I purchased in the early 90's I was in my late 20's at the time......still premium paying, but that's ok with me. I borrowed money out.

Anyway I would recommend you get an in force illustration from met life, and ask them to illustrate what happens if you stop paying premiums.....gotta think you could borrow from the policy....probably automatically if you have automatic premium loan on it.
Probably a bad decision to replace it.

 

[adefina]

Thank you for all your responses! I am in New York. The reason we asked Citibank is because we want to stop paying the premiums on this policy, period. My mom stopped making payments outright on the policy in 2010, and has been paying the annual premium using dividends her policy has received instead. My understanding is that she'll be able to keep doing this for 5 more years, assuming the same annual dividend, before that money runs out and she'll have to start making payments again every year until she dies.

The death benefit on the policy is $316,769. The cash value is $111,723. Citibank gave us an option to rollover the cash value of the Metlife policy to a Prudential policy that would offer a death benefit of $304,842 and no more premiums. Is there a catch here I should be asking them about, or something I'm missing?

The main issue is that when my mom bought the policy, she never expected to be making payments for this long.

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The guy at Metlife recommended using the dividends to pay, which we're already doing, and then said that we could use the cash value of the policy to pay. I'm sort of hesitant to let the cash value of the insurance drop by an unspecified amount when there is another policy available where we could retain the cash value for a slightly lower death benefit. Is my thinking wrong here?

The primary purpose of the policy was to provide for me and my sister in case anything happened when we were young. But we're independent now.

Deepsea, do you plan to continue borrowing money out and do you worry the cash value could reach zero? Or does it not work like that?

 

[BNTRS]

I'm sort of hesitant to let the cash value of the insurance drop by an unspecified amount when there is another policy available where we could retain the cash value for a slightly lower death benefit.

The Citibank proposal is most likely a Guaranteed Universal Life Insurance policy (GUL). They are making a single payment with your mom's whole life cash value and creating a guaranteed death benefit. There are a few things you need to check on.

1. How long is the guaranteed death benefit period? GUL's have several options on this: e.g. to age 90, 95, 100, 120...

Personally, I wouldn't go with anything less than age 100 and would much prefer age 110 to 120 (probably won't notice much of a difference between 110 and 120 in terms of price, which will be reflected in how much death benefit you end up with).

2. You WILL NOT keep access to cash value. Touching any cash value in this policy voids the guaranteed death benefit.

3. How much does the Met dividend exceed $3,000? The claim that the dividend will eventually not pay the premium seems odd. Unless the dividend declines it should continue to increase and continue to cover the premium.

4. If the death benefit is not immediately important anymore, you could trigger the reduce paid-up option. This guarantees that no future premiums are due and keeps the policy in force. The death benefit will decline somewhat, and MetLife can you provide you with precise details on how much of a reduction will take place. The policy will continue to earn dividends, and those dividends can increase the death benefit moving forward.

I would suggest looking at this and comparing it to the Citibank proposal both immediately and long term (e.g. does the Met policy death benefit grow to a higher amount than the Citi proposal by age 85 when she's?).

 

[adefina]

Wow thank you. That makes so much sense. I will look into those questions.

Her annual dividend is $1700. Her premium though is $3000. The money she's been using to pay the premium is the dividends that have built up over time.