WLI: How many years to front load?

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vvume
Posts: 11
Joined: Mon Jan 11, 2016 10:21 am

WLI: How many years to front load?

Post by vvume » Wed Jan 13, 2016 10:37 am

Hi,

I have purchased 3*500K/each NYLI WLI policies for my wife and 2 sons (then 5, 3) with an OPP rider back in 2012. I have already paid 3 years of the max OPP allowed in addition to the base premium for each of the policies. Is there any guidance on how many years to front load the policies to give it a good head start? The 3 years of OPP has increased the face value to roughly around 600K now.

Background: I got a WLI insurance for my wife as she got the best rate possible @ 32years. I primarily purchased WLI for my kids because diabetes runs strong on both sides of the family, and wanted them to be sufficiently insured when they don't undergo medical tests and the base premiums are low (about $2500/each). This gives me a very long investment timeline for their policies. I have an expensive 20 year term life for myself due to diabetes. I max out our 401k+Roth IRA, and ESPP (all x2) and this is on top of those. I also have a 529 with 8 years of instate tuition in it for the 2 boys. I am from a culture that definitely believes in giving kids a strong financial base when they start their lives

Thanks,

Dulocracy
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Re: WLI: How many years to front load?

Post by Dulocracy » Fri Jan 15, 2016 5:38 pm

I am going to cautiously respond to this post. Unfortunately, this site gets a lot of insurance salespeople who troll the site pretending to be interested in Whole life. As you have made other posts, I did not want you to think this board was ignoring this one.

Typically, the members of this site are very anti-whole life insurance. This does not mean that I am saying it is not appropriate for your situation. I have no idea whether it is or not. Most on this site would recommend against WLI, even after you have maxed out tax advantaged accounts.

I would advise against writing back in defense of WLI, unless you want to be accused of being a salesman. :twisted: The fact that you thought this product was appropriate for you does not mean that you are wrong at all. It may be. I would not recommend looking for advice on this forum for WLI, however. I would seek that information elsewhere.

Best wishes! :sharebeer
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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jhfenton
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Location: Ohio

Re: WLI: How many years to front load?

Post by jhfenton » Fri Jan 15, 2016 5:47 pm

Dulocracy wrote: Typically, the members of this site are very anti-whole life insurance. This does not mean that I am saying it is not appropriate for your situation. I have no idea whether it is or not. Most on this site would recommend against WLI, even after you have maxed out tax advantaged accounts.
Pretty much this. Except for some estate-planning applications where you need "permanent" insurance, I would never recommend WLI. And for that reason, I have no idea what advice to give with respect to existing policies.

Topic Author
vvume
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Joined: Mon Jan 11, 2016 10:21 am

Re: WLI: How many years to front load?

Post by vvume » Fri Jan 15, 2016 5:56 pm

Oops - didn't realize that anti-WLI sentiments run that strong on these forums. I am definitely no salesman, and I am ready to admit that I dodged a bullet buying WLI policy for my wife (I still think it was good for the kids given my medical condition with genetic propensity). I now make it clear to my friends that WLIs are primarily high net worth estate planning tools, with very narrow exceptions. I am at the bottom of the suitable candidates for WLI. Having said that, gaining meaningful information about WLIs, esp. dividend history and how dividends impact individual policies have been very frustrating to locate. I guess I have to find that elsewhere.

Independent
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Joined: Tue Sep 22, 2009 1:09 pm

Re: WLI: How many years to front load?

Post by Independent » Fri Jan 15, 2016 9:18 pm

Yes, this is very complex. The standard advice around here is to not mix insurance and investments. So, nobody has any general guidelines on how much single premium WL you should buy (that's what you're getting with the paid up additions).

You present your facts as a special case. Your boys may have more mortality risk than the company is pricing into it's product. And, you apparently have enough income/assets that you are running out of tax-advantaged ways to save money. It would be very hard to sort through those issues without a lot of facts.

All I can say is that the agent should be able to provide an "inforce illustration" which could show future values with dividends. You'd want two sets of illustrations -- one based the policies as they stand today, the other assuming you buy more additions. Note that those illustrations are based on current dividend scales, which are not guaranteed.

The agent should also be able to provide general information on dividend scale changes over prior years, to at least give you a trend. Dividends, especially on your additions, depend on the interest the company is earning on its bonds. It has probably been replacing higher interest bonds with lower interest bonds, so the trendline in it's interest income is probably downward.

Topic Author
vvume
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Joined: Mon Jan 11, 2016 10:21 am

Re: WLI: How many years to front load?

Post by vvume » Mon Jan 18, 2016 9:57 am

Sorry to drag this on; so most mutual life insurance companies simply invest in traditional bonds? If that is the case and they have been progressively switching to lower interest bonds, then it doesn't bode well for dividend returns. In fact, I don't think the interest rates are ever going to be as high as it used to be in the past. I'll follow up with my agent and have him present different scenarios.

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