Whole Life Policy Review

[DHK]

5) Could you expand on how this works/what this means? How would I go about adjusting my policy to do such a thing?

In my opinion, life insurance is one of THE most powerful long-term savings vehicles. There are MANY reasons one may want to maximize their cash contributions to life insurance.

To maximize cash value accumulation, there are riders that allow for "cash dump-ins" often called "Paid Up Additions" or "Additional Life Insurance Riders". However, they do buy additional paid up life insurance as well, therefore, they may require additional medical underwriting to qualify.

It may be worth asking about adjusting your policy to allow for this. Now, each policy design is different, but I would *think* that it would be available with a 'paid up at 65' policy.

 

[AboutThatLife]

I think you did a great thing...kudos to you. I agree its probably not maxed out, but certainly a good policy. If we (collectively) as insurance agents and advisors could get more young people to understand the power of putting life insurance in place early, it would be a great thing.

If you look at your policy... after the first few years it is growing (cash value) by almost what your premium is. Good stuff. These policies just get better and better every year, and the great thing is...no worries about "what if". Obviously its an illustration, but lets say it plays out close to what it shows... at 65 you have a policy with $800k+ death benefit, and $400k+ in cash value - that you have no payment on from then on. Good stuff

I've noticed this benefit doesnt extend to children.

 

[scatteredRubbish]

To maximize cash value accumulation, there are riders that allow for "cash dump-ins" often called "Paid Up Additions" or "Additional Life Insurance Riders". However, they do buy additional paid up life insurance as well, therefore, they may require additional medical underwriting to qualify.

It may be worth asking about adjusting your policy to allow for this. Now, each policy design is different, but I would *think* that it would be available with a 'paid up at 65' policy.

Thanks for the video DHK, that was very informative. I know that my policy has it's dividends going towards buying PUA's - is this the same as the rider you discussed? Also, in regards to the MEC limit, does that change on a per individual basis and are you suggesting funding my policy up to that limit? If that's the case should I just be able to contact NWM and request that?

Thanks to everyone for the resources and advice!

 

[LGilmore]

I've noticed this benefit doesnt extend to children.

And why would that be in this case?

 

[pfg1]

I've noticed this benefit doesnt extend to children.

Not sure what you mean...

 

[AboutThatLife]

And why would that be in this case?

I'm talking about with UL's. WL is different.

 

[pfg1]

I'm talking about with UL's. WL is different.

Ok, but honestly I'm still not sure what you are talking about. You quoted me and said "that benefit doesn't extend to children". I'm confused I guess.. what benefit?

 

[AboutThatLife]

Ok, but honestly I'm still not sure what you are talking about. You quoted me and said "that benefit doesn't extend to children". I'm confused I guess.. what benefit?

The cash value growth. Any large premium you use to fund a UL for a child will buy them too much insurance. If you keep it level it will MEC, and if you set it to increasing DB it will be too expensive by the time they turn 18 and the COI will eat up the premiums.

 

[scagnt83]

The cash value growth. Any large premium you use to fund a UL for a child will buy them too much insurance. If you keep it level it will MEC, and if you set it to increasing DB it will be too expensive by the time they turn 18 and the COI will eat up the premiums.

You are correct that you are not able to have as high of premiums for a child. But I have sold child policies that have $5k+ per year going into them. As long as the parents are well insured there are multiple ways to justify high DBs on a child.

The policy will not MEC just because you have the DB option set to Level. You are most likely using GPT testing. If you use Opt1 you should use CVAT.

The COI will most certainly not eat up the premiums by age 18. You are doing something VERY wrong when running illustrations!!

I suggest that you find a good IMO to work with and have them run illustrations for you... or teach you how to do it properly.

 

[Robert Barney]

A little background on myself: I am 24 year old Software Engineer currently making ~65k and soon moving to a new position making 85k year. I am currently paying $300/month to fund this policy. I am currently contributing 5% to my 401(k), and will be upping that to 8% for the match at my new employer. My 401(k) and WL policy are currently my only forms of retirement savings (No IRA or taxable accounts). In addition, my new employer offers and HSA and ESOP. I also have ~24k in student loans that I pay 500/month to and also a car loan ~14k that I pay 230/month to. I am not yet married, though plan to be in the next ~2-3 years and plan to shortly be engaged. I also have no children. In addition, I am not sure if I necessarily value the death benefit of WL yet or not.

After some research on the web, primarily at /r/personalfinance and the boglehead forums (tried to take the advice with a grain of salt), I'm not quite sure a WL policy is in my best interest currently - though I can definitely see the benefits despite the harsh criticism.

Would it be more beneficial for me to drop my WL policy and contribute to a ROTH IRA and up my contributions to my 401(k) or ESOP and focus more on my debt?

1. You don't need ANY insurance right now, as no one is dependent on you.

2. The most important thing to protect is your insurability - your right to buy life insurance later on.

3. I would pretend that you are married, with young children, and that they are dependent upon your income. How much insurance to take care of them?

4. You make $85,000 per year, and if you are good at you job, you are going to make more down the road. I would insure an income of $85,000 for 25 years.

5. Capital cost of that is: $1.5 million (schedule attached)

6. I went to my website: www.term4sale.com and ran a quote for a 24 year old for $1.5 million of 30 year term. Assuming you qualify, you can get $1.5 million of 30 year term from Assurity Life for $790 per year.

7. Do you need it - not right now. But you'll be glad you bought it when those kids start coming along. Owning that policy means no one can take it away from you later.

8. Take the difference you were spending on the W/L policy, stick it into your HSA or your IRA, providing those contributions belong to you if you leave your employer.