Should I Cash Out my NML Whole Life Insurance?

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ytsejam23
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Should I Cash Out my NML Whole Life Insurance?

Post by ytsejam23 » Thu Dec 21, 2017 3:09 pm

Hello,
I've been thoroughly reading these forums and come to the conclusion I need to switch my current life insurance situation from what I have outlined below to a 25 or 30 year term policy. My parents bought me a policy when I was 6, and were I guess talked into 3 more since then, so I have 4 total whole life policies that offer very little payout if I die tomorrow.

Long story short, I (35 male) married this year, and in changing the beneficiary from my parents to my wife (31) The 'financial adviser' from NML that contacted me is trying to get me to buy us each $1M whole life policies with $3000/yr premiums to start with, and has been pushing disability as well. The phrases he's been using (term is like renting, wouldn't you rather own?) were red flags, and going through the forums it's similar to others that have posted, which usually have many replies saying "run away from this person!"

My issue is whether to cash out the whole life, as I am unsure how to read the inforce illustration I was provided. I don't trust talking to my new "adviser", so I'm looking for advice here on whether I should cash out this policy, since one of them is 30 years old. This is all new to me and I'm trying to do what's best.

Facts:
4 Whole life 90 policies, purchased in 1988, 2004, 2007, & 2009
Initial Amount: $70,000
Total Death Benefit (I think): $79,008
2017 Divided: $101.27

1988 (As of August, 2017): Basic $10K, Div. $7,356, total: $17,356
Cash value Increase: $196.35
2017 Dividend: $46.68
Cash Value: $3,564.53, Cost Basis: $2,700.48 Taxable Gain if Surrendered: $864.05

2004 (As of Sept, 2017): Basic $20K, Div. $1,124, Total: $21,124
Cash value Increase: $242.50
2017 Dividend: $30.81
Cash Value: $2,224.09, Cost Basis: $2,964.13 Taxable Gain if Surrendered: $0

2007 (As of June, 2017): Basic $20K, Div. $313, total: $20,313
Cash value Increase: $211.46
2017 Dividend: $13.30
Cash Value: $1,572.21, Cost Basis: $2,405.40 Taxable Gain if Surrendered: $0

2009 (As of July, 2017): Basic $20K, Div. $215, total: $20,215
Cash value Increase: $179.38
2017 Dividend: $10.48
Cash Value: $1,092.55, Cost Basis: $2,268.40 Taxable Gain if Surrendered: $0

Total Cash Value Guaranteed: $8,786
Dividends used to: increase cash value and coverage

Monthly Premium: $73.02 total

Yearly Premium: $842
Yearly Premium by policy:
1988: $105
2004: $222
2007: $235
2009: $279

The illustration shows
2017-18 $9,212 guaranteed cash value
2018-19 $9,997 guaranteed cash value
2019-20 $10,809 guaranteed cash value

I don't fully understand all the numbers, but it seems like a bad deal overall. Should I surrender and cash in all of them, including the 1988 policy after I start a new term policy? Or does it make any sense to keep any of them, with the one that 30 years old I see in some postings saying that after 15 years it's fine to keep them ? I have more information if needed as well. Thanks in advance!
Last edited by ytsejam23 on Wed Jan 17, 2018 2:03 pm, edited 1 time in total.

Dandy
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by Dandy » Thu Dec 21, 2017 10:52 pm

The 1988 policy might be worth keeping since the yearly premium is $105 and the dividend is about half of that. So you are getting some insurance for about $50 a year. But, what you haven't identified is the face value of the policy e.g. how much insurance does your premium buy? Whole life is often a bad choice but after you have paid it for a couple of decades it might be better than term cause the dividends usually get larger the longer the policy is in place so the net cost of the insurance drops.

Also, depending on the policy the premiums may stop at a certain age but even if not they usually don't increase. Also, the dividends are often tax free. I would take them in cash since most insurance companies don't pay much if you let them accumulate and if why use them to buy more insurance if you don't feel you need much insurance.

afan
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by afan » Fri Dec 22, 2017 12:08 pm

Several separate issues, it is better consider them individually.

Do you need life insurance?
If you need life insurance, how much, what kind and for how long?
What should you do with the policies you have?

Do you need to replace your expected earned income to protect those who depend on your income? With the exception of the independently wealthy, for families with children this answer is usually "yes". For families without children or single people, it depends on who depends on your income. If your spouse would need your income replaced to continue through life as expected, then the answer is probably yes, at least for a while. If you are single but are supporting, or planning on supporting, someone else- say aged parents- then the answer might be yes.

Identify the person or people who are relying on your income, figure out how much money they would need to replace- it is rarely your entire income- and then calculate the amount of life insurance death benefit, if any, you need.

If you need insurance, see above for "How much"

What kind? Almost always term. The uses for permanent have largely dried up for estate planning. For protection of those who need your income- term. If you have some unusual circumstances that mean you will need insurance long into older age, or for your entire life, including after retirement, then there are reasons to consider some sort of insurance that, incidentally, also accumulates cash value. If you do your estate planning with an experienced estates and trusts attorney, that person will bring it up if you need this. You probably don't. Not many people do.

What to do with the existing policies?
If you decide you need some life insurance, then get that in place before cancelling these policies. Although the death benefits are small, if you were to die tomorrow the pay off of the policies will still be more than the cash you would get out. But when planning your life insurance needs, assume they will be filled by new policies, not these.

Once you have your correct amount of coverage in place you should definitely get rid of the policies that have losses. But you might not want to simply cash them out. There is an alternative, described on bogleheads, that lets you exchange them for a low cost annuity. The annuity can then grow with no tax due on it while it grows- because it is an annuity. The exchange preserves your cost basis so you could cash out the annuity when its value equals your basis and have no taxes to pay. At least you could under current law. I have not heard whether the new tax law has changed this.

For the policy that would generate a taxable gain, you need the in force illustration. This will show you how the guaranteed value will change over time if you keep paying premiums and it will show you the projected value including, non-guaranteed, dividends. Compare the guaranteed rate of return to something similarly secure like CDs or maybe a short term bond fund. Keep in mind that, since it is taxable, you don't get all the money if you cash out now or in the future. So for each year you have to compare the growth of after tax value in the cash value to after tax value of a taxable investment.

The above is the correct answer. But a simpler answer could be "Get the right amount of term insurance. It is fine to include NWML in your shopping, but do not buy from them just because of the existing policies. Buy from them if they offer the best deal. Then cash out the whole life policies. Ignore anything the life insurance salesperson tries to tell you. You might leave a little money on the table with this simplified approach, but the dollar amounts are too small to waste a lot of time and effort trying to optimize. You almost certainly have more productive uses of your time"
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

technovelist
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by technovelist » Fri Dec 22, 2017 12:18 pm

Whole life doesn't make sense for most people in most situations. You should probably have a good amount of term, the appropriate amount depending on how much income would need to be replaced if you or your wife died.
In theory, theory and practice are identical. In practice, they often differ.

ytsejam23
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by ytsejam23 » Fri Dec 22, 2017 1:32 pm

Thank you for the replies.

Dandy, the ~$50/year I pay after dividends is for $17,356, with the original amount being $10K and the rest being dividends, so while it's only around $5/month, it's not that much in total, if I have it right. I have an inforce illustration for all 4 policies that shows my premium doesn't go to $0 until 2073 (when I would be 91, so that must be the year it expires), but I don't have one for just the 1988 policy. Taking it in cash seems to be my best bet.

afan, I think I need life insurance for my wife and (hopefully) 2 future children I will have over the course of the next 5 years, so that in case I die they have enough to cover mortgage, college, etc. I've done calculations using that NY Times online calculator and I believe $800K should be enough of a term policy, which I figure 25 or 30 years to cover my family until the kids are into college. I have the inforce illustration, but I'm not entirely sure on how to read it. As far as I can tell for cashing them in from my statements, I only have a taxable gain of $864 on the 30 year policy, the rest show $0 if surrendered. So I think it'd be best to cash it all out.

technovelist, Thanks for your input, I think that's the best course of action after learning about this forum and beginning to learn more about life insurance.

Dandy
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by Dandy » Fri Dec 22, 2017 3:23 pm

That $50 is buying at least $10,000 of insurance and that $50 will decline until the dividend will eventually pays all of the premium and generates extra for you. At a basic level compare what face amount of term insurance coverage you can get for $50/year to see if the whole life might be a better deal.

I'm not sure if the extra $7k+ is dividends you left to accumulate or were used to buy additional insurance - probably the latter. You can change the dividend to pay premiums and you will have $17,000 of coverage for $50 dollars a year that will likely decline each year. I'm pretty sure that is cheaper than what you can buy $17k in term life coverage -- but term has gotten very cheap so check it out.

If the dividends were left to accumulate you can cash them in

Whole life is usually a bad deal when you first buy it but after you have it for decades, you can't get those high premiums back but going forward it is often a good deal because of the growth of the dividends.

technovelist
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by technovelist » Fri Dec 22, 2017 4:41 pm

ytsejam23 wrote:
Fri Dec 22, 2017 1:32 pm
Thank you for the replies.

Dandy, the ~$50/year I pay after dividends is for $17,356, with the original amount being $10K and the rest being dividends, so while it's only around $5/month, it's not that much in total, if I have it right. I have an inforce illustration for all 4 policies that shows my premium doesn't go to $0 until 2073 (when I would be 91, so that must be the year it expires), but I don't have one for just the 1988 policy. Taking it in cash seems to be my best bet.

afan, I think I need life insurance for my wife and (hopefully) 2 future children I will have over the course of the next 5 years, so that in case I die they have enough to cover mortgage, college, etc. I've done calculations using that NY Times online calculator and I believe $800K should be enough of a term policy, which I figure 25 or 30 years to cover my family until the kids are into college. I have the inforce illustration, but I'm not entirely sure on how to read it. As far as I can tell for cashing them in from my statements, I only have a taxable gain of $864 on the 30 year policy, the rest show $0 if surrendered. So I think it'd be best to cash it all out.

technovelist, Thanks for your input, I think that's the best course of action after learning about this forum and beginning to learn more about life insurance.
You're quite welcome. By the way, could I ask what state you live in? Life insurance companies are regulated at the state level, so the correct approach might depend on where you live.
In theory, theory and practice are identical. In practice, they often differ.

ytsejam23
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by ytsejam23 » Fri Dec 22, 2017 5:00 pm

Technovelist, I live in RI currently, and will be moving to MA in 5-6 years.

Dandy, the best comparison I can find on term4sale is a 10 year term, $25K policy for $79/year. A $10K policy doesn't show as a available.

For the 1988 policy, it also has Additional Purchase Benefit, and Waiver of Premium. Again, current net death benefit of $17,356 with cash value of $3,623.76. It says that I used my 2017 dividend to increase cash value and coverage, so you're saying changing that to cover my premium instead is what lowers the premium to ~$50/year, until the dividends increase enough to eliminate my cost completely.

So I guess I should keep the 1988 policy since the main upfront costs are paid for, and then cash in the other 3, which will be $4,888.85 with nothing taxed? Is that what the $0 under taxable gain if surrendered on my yearly statement means?

And also buy the term life as I mentioned above.

technovelist
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by technovelist » Fri Dec 22, 2017 5:47 pm

ytsejam23 wrote:
Fri Dec 22, 2017 5:00 pm
Technovelist, I live in RI currently, and will be moving to MA in 5-6 years.

Dandy, the best comparison I can find on term4sale is a 10 year term, $25K policy for $79/year. A $10K policy doesn't show as a available.

For the 1988 policy, it also has Additional Purchase Benefit, and Waiver of Premium. Again, current net death benefit of $17,356 with cash value of $3,623.76. It says that I used my 2017 dividend to increase cash value and coverage, so you're saying changing that to cover my premium instead is what lowers the premium to ~$50/year, until the dividends increase enough to eliminate my cost completely.

So I guess I should keep the 1988 policy since the main upfront costs are paid for, and then cash in the other 3, which will be $4,888.85 with nothing taxed? Is that what the $0 under taxable gain if surrendered on my yearly statement means?

And also buy the term life as I mentioned above.
I don't see anything wrong with that plan.

But get the term life in place first, just in case you might turn out to be uninsurable or nearly so. That shouldn't take more than a month or so to do, so it shouldn't cost you any significant amount to keep the current policies until then.
In theory, theory and practice are identical. In practice, they often differ.

afan
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by afan » Fri Dec 22, 2017 6:31 pm

As I said, the dollar amounts are small so it may not be worth a lot of trouble to optimize.

Your numbers for the 1988 pole do not add up. The taxable gain would be the difference between the surrender value and the cost basis. You have indicated the taxable gain as equal to the cost basis instead. Unless there is more to it, that appears to be incorrect.

If you want to make the best you can on the policies with losses and delay or completely avoid paying taxes on your 1988 policy gain then consider the 1035 exchange, to which I alluded above:




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We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

Benton Bair
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by Benton Bair » Fri Dec 22, 2017 11:03 pm

Did anyone ask what the beneficiary (spouse) thinks about the amount needed per month and for how long? It is her financial risk to manage when he dies. When viewed from her perspective the risk looks much different. Longer in time and larger in amount. What will a $1 be worth 30 years, 40 years and 50 years from now? Less in value and less in numbers. Sounds much like a decreasing limited term.

Now that we can agree a large amount is needed because these dollars devalue with time and acquiring more may not be an option if health issues arise. She can buy a large level priced 10 or 20 year life insurance contract that's guaranteed to continue until maturity (death). Right now the availability of coverage is limited by the insurance company's willingness to issue and the owners ability to pay. Assume they have only one chance to get as much as they will ever have.

She the spouse, beneficiary and owner will want to buy as much as the company will offer and own it until he dies. The need does not go down nor does it go away. Unless you want to assume a $1 will appreciate in value and she divorces him. Does anyone think she wants to make those assumptions?

Think like a Risk Manager with a fiduciary responsibility - be conservative. Then go invest like a Boglehead. :greedy

tj
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by tj » Sun Dec 24, 2017 1:45 pm

technovelist wrote:
Fri Dec 22, 2017 5:47 pm
ytsejam23 wrote:
Fri Dec 22, 2017 5:00 pm
Technovelist, I live in RI currently, and will be moving to MA in 5-6 years.

Dandy, the best comparison I can find on term4sale is a 10 year term, $25K policy for $79/year. A $10K policy doesn't show as a available.

For the 1988 policy, it also has Additional Purchase Benefit, and Waiver of Premium. Again, current net death benefit of $17,356 with cash value of $3,623.76. It says that I used my 2017 dividend to increase cash value and coverage, so you're saying changing that to cover my premium instead is what lowers the premium to ~$50/year, until the dividends increase enough to eliminate my cost completely.

So I guess I should keep the 1988 policy since the main upfront costs are paid for, and then cash in the other 3, which will be $4,888.85 with nothing taxed? Is that what the $0 under taxable gain if surrendered on my yearly statement means?

And also buy the term life as I mentioned above.
I don't see anything wrong with that plan.

But get the term life in place first, just in case you might turn out to be uninsurable or nearly so. That shouldn't take more than a month or so to do, so it shouldn't cost you any significant amount to keep the current policies until then.

I don't see any reason to cash them out unless you would have zero tax liability. If the guaranteed dividend isn't a high rate (my parents bought a policy on me in the 80's and the interest rate is so much higher than anything you could buy today), then just 1035 exchange them into a Vanguard variable annuity.

ytsejam23
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by ytsejam23 » Wed Jan 17, 2018 4:46 pm

Ok so an update on this post after speaking with the agent and doing some more thinking.

The 1988 policy has a minimum rate of 3%, which is at 4.9% for this year. If I were to keep that one, I could apply the dividend to the premium, which would then pay for itself fully in 14 years, but the premium would be less over time as well. For example, next year my annual premium could be $58 and it would be $21 in year ten, with the presumptive rates they provide of dividends. He also said that having the dividend pay the premium instead of buying insurance will substantially slow down how much the policy increases, with it staying at at worth of $17,356 for the next 13 years.

TJ, I was hoping it would have a high interest rate like you said the policy your parents bought you, but that doesn't seem to be the case, just a minimum of 3% that is variable.

I have zero tax liability for the 3 newest policies.

afan, I had repeated numbers for my cost basis for the 1988 policy in my original post, I have updated it to have a cost basis of $2,700.48 with taxable gain of $864.05.

Through term4sale, I was quoted an 800K/30 year policy at $57/month. NML quoted me a 20 year policy at the same amount for $51, and then suggested if I want to do 30 years, I get a term to age 80 to cover the first 10 years to make up the difference between a 30 year policy, with the premium going up annually. First year of that policy is $447, and the 10th year is $759. After that, he said I would likely pay ~$100/month to convert to the 20 year policy.

From my math, that means I pay $5,657 over the 10 year period for the Term to age 80, and then ~$24,000 for 20 years at $100/month for a total of $29,657 for 800K life insurance for 30 years. The other policy is $20,520 for 30 years.

From these numbers, it seems like the 30 year term policy is the right deal, but I don't know if I'm missing something.

This additional information on my 1988 policy has me a bit confused as well.

If I die tomorrow, my wife gets $17,537, and if I cash it out tomorrow I get $3,720.

I can pay for 14 years, totaling about $433 in premiums if I used the dividends. At that point, my policy is worth $17, 356 with a guaranteed cash value of $6,739. After that, it starts to grow again with both insurance and cash value but I don't know if it's worth keeping that one or investing that money elsewhere. I can add the info about how much is grows if that would help.

Thank you.

TheHouse7
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by TheHouse7 » Wed Jan 17, 2018 5:04 pm

Please cash out all these policies and get term insurance.

I pay $36 per month for 1.5 million in coverage.

:sharebeer

From what I understand only the rich can benefit from investment insurance under very particular circumstances.

I plan on paying for term insurance until no one is counting on my income.
"PSX will always go up 20%, why invest in anything else?!" -Father-in-law early retired.

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celia
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by celia » Wed Jan 17, 2018 5:41 pm

I don't understand your insurance either but want to point out something I noticed:
ytsejam23 wrote:
Thu Dec 21, 2017 3:09 pm
Yearly Premium: $842...

The illustration shows
2017-18 $9,212 guaranteed cash value
2018-19 $9,997 guaranteed cash value
2019-20 $10,809 guaranteed cash value...
Your yearly premiums for all 4 policies is $842, but the cash value rises about $800 for each year you wait. To me, that is the same as taking the cash value and putting it in an account, then adding the "premium" (you would have paid) to the account for each year going forward. Of course, you can invest this amount and have it grow faster than the cash value will grow, but then you don't have life insurance. Letting it continue would have the cash value grow by an amount a little less than your yearly premiums AND you would still have life insurance. But then, I'm not sure I understand this correctly.

Have you checked out the financial stability of the insurance company at www.AMBest.com? If you register with them and get a free account, you can learn about insurance companies! I think you might have to give them your email address, but they have never contacted me since I gave them mine. They don't SELL insurance. They EVALUATE the insurance companies.

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celia
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by celia » Wed Jan 17, 2018 5:58 pm

ytsejam23 wrote:
Fri Dec 22, 2017 1:32 pm
afan, I think I need life insurance for my wife and (hopefully) 2 future children I will have over the course of the next 5 years, so that in case I die they have enough to cover mortgage, college, etc. I've done calculations using that NY Times online calculator and I believe $800K should be enough of a term policy, which I figure 25 or 30 years to cover my family until the kids are into college.
I think you and your wife need more than $800K each because of inflation. If you die in 10 years with a 30-year term policy started now and the kids are 6 and 7, they need to be raised for at least 12 more years, then college. Your living expenses with two kids will also be more than your current living expenses.

ytsejam23
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by ytsejam23 » Wed Jan 17, 2018 6:35 pm

TheHouse7, I wish I could get $1.5 million for $36/month, but I haven't seen any numbers close to that with anything I've had quoted. I'm not leaning more towards canceling it all after obtaining term since the 3% guaranteed is less than I thought with a policy that's 30 years old.

Celia, that's a good point on the additional insurance. I did plug all that info into this calculator and it gave me around $800K as the estimated number, assuming my wife continues to work and a 3% inflation rate with 6% after-tax net investment yield.

In regards to the paying $842/year and getting an $800 increase, that's what made me really start investigating what's going on and lead me to this forum.

For the stability of the insurance company, my current policies are through Northwestern Mutual, and the term I'm looking at is through Legal and General America, which both seem to be quite reputable companies.

tj
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by tj » Thu Jan 18, 2018 12:05 pm

Have you played with term4sale.com ? It will show you rates for several companies.

You can then get those rates with an independent agent, I used terminsurancebrokers.com

ytsejam23
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by ytsejam23 » Thu Jan 18, 2018 12:30 pm

tj wrote:
Thu Jan 18, 2018 12:05 pm
Have you played with term4sale.com ? It will show you rates for several companies.

You can then get those rates with an independent agent, I used terminsurancebrokers.com
I have, but the numbers I posted with $57/month for $800K is the best that it comes up with for that size policy over 30 years.

afan
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by afan » Thu Jan 18, 2018 4:08 pm

ytsejam23 wrote:
Wed Jan 17, 2018 4:46 pm
Ok so an update on this post after speaking with the agent and doing some more thinking.

The 1988 policy has a minimum rate of 3%, which is at 4.9% for this year. If I were to keep that one, I could apply the dividend to the premium, which would then pay for itself fully in 14 years, but the premium would be less over time as well. For example, next year my annual premium could be $58 and it would be $21 in year ten, with the presumptive rates they provide of dividends. He also said that having the dividend pay the premium instead of buying insurance will substantially slow down how much the policy increases, with it staying at at worth of $17,356 for the next 13 years.

TJ, I was hoping it would have a high interest rate like you said the policy your parents bought you, but that doesn't seem to be the case, just a minimum of 3% that is variable.

I have zero tax liability for the 3 newest policies.

afan, I had repeated numbers for my cost basis for the 1988 policy in my original post, I have updated it to have a cost basis of $2,700.48 with taxable gain of $864.05.

Through term4sale, I was quoted an 800K/30 year policy at $57/month. NML quoted me a 20 year policy at the same amount for $51, and then suggested if I want to do 30 years, I get a term to age 80 to cover the first 10 years to make up the difference between a 30 year policy, with the premium going up annually. First year of that policy is $447, and the 10th year is $759. After that, he said I would likely pay ~$100/month to convert to the 20 year policy.

From my math, that means I pay $5,657 over the 10 year period for the Term to age 80, and then ~$24,000 for 20 years at $100/month for a total of $29,657 for 800K life insurance for 30 years. The other policy is $20,520 for 30 years.

From these numbers, it seems like the 30 year term policy is the right deal, but I don't know if I'm missing something.

This additional information on my 1988 policy has me a bit confused as well.

If I die tomorrow, my wife gets $17,537, and if I cash it out tomorrow I get $3,720.

I can pay for 14 years, totaling about $433 in premiums if I used the dividends. At that point, my policy is worth $17, 356 with a guaranteed cash value of $6,739. After that, it starts to grow again with both insurance and cash value but I don't know if it's worth keeping that one or investing that money elsewhere. I can add the info about how much is grows if that would help.

Thank you.
Welcome to the world of life insurance shopping. There are a lot of moving parts. Best to break them down.
I did not follow the plan from NWML to create the equivalent of a 30 year term. I gather they offer 20 year term, but not 30 year term? If you need 30 years of coverage then it would be simpler to just buy a 30 year policy. Combining a 20 year policy with annual renewal term, which is what I think NWML is offering, seems like a complexity you don't need. Any ART can be continued for a longer period. Many 20 year term policies then become ART after the 20 year period is over. If you go with that, 20 year term that then becomes ART remember that the premium will be a lot higher for those last 10 years.

When shopping for life insurance recognize that there are usually two prices: The price they want to talk about, which assumes their current insurance expense and investment return projections are correct and the price they guarantee as the maximum. The maximum is a lot more. To an extent when you compare policies you are comparing how aggressive one company might be vs others in its assumptions.

I am not an insurance expert, but I get the impression that NWML has done pretty well about meeting its projected premiums.

There are a LOT of insurance companies. Using a website to find one is a good idea, but I don't think all companies list their policies on such sites. I would certainly look at some others. USAA often has good prices and you don't need to be in the service to buy life insurance from them. Although it is a bit more work, look around for other policies of the duration you need.

FInancial status of the insurance company: NWML is at the top in terms of financial strength. People disagree about whether you should care. States have guaranty funds to which insurance companies contribute and which will pay the death benefits if a company fails. Because of this, in theory, you can buy the cheapest policy and not worry about the strength of the company. Some states have a cap on the amount of coverage that is protected. If you had a policy and your company fails, then your heirs may get only the cap, rather than the full amount.

A company that runs into financial trouble may start raising its premiums within the maximum in your contract.

If you want an investment with properties similar to whole life- accumulates without annual taxation, based on the investment success of an insurance company, relatively low return but very low risk, then you may be better off doing that through an annuity. You then decide how much to invest in that product independent of how much life insurance you need.

I would get rid of the whole life policies on which you have a loss. Either 1035 exchange if you want to milk as much as you can out of the loss, or just cash them in and eat the loss.

The "3%" or "4.9%" return given for your policy with a gain can be misleading. Typically that means the return as applied to the money that is in the cash value. It does not include the portion of the premium that goes to insurance cost, expenses or commissions. To get a real % return you would have to take the in force illustration and plug it into a spreadsheet. Use the IRR function to tell you what the effective return is on the total amount of money you are paying. It will probably be less.

Some insurance expert, not me, should be able to tell you whether you could roll all 4 policies into one annuity via 1035 exchange and avoid owing tax on the one policy on which you have a gain because you are also converting the 3 policies on which you have a loss.

If it were me, I would get the right amount of term insurance and get out of the whole life policies.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

ytsejam23
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by ytsejam23 » Thu Jan 18, 2018 7:18 pm

afan wrote:
Thu Jan 18, 2018 4:08 pm
Welcome to the world of life insurance shopping. There are a lot of moving parts. Best to break them down.
I did not follow the plan from NWML to create the equivalent of a 30 year term. I gather they offer 20 year term, but not 30 year term? If you need 30 years of coverage then it would be simpler to just buy a 30 year policy. Combining a 20 year policy with annual renewal term, which is what I think NWML is offering, seems like a complexity you don't need. Any ART can be continued for a longer period. Many 20 year term policies then become ART after the 20 year period is over. If you go with that, 20 year term that then becomes ART remember that the premium will be a lot higher for those last 10 years.

When shopping for life insurance recognize that there are usually two prices: The price they want to talk about, which assumes their current insurance expense and investment return projections are correct and the price they guarantee as the maximum. The maximum is a lot more. To an extent when you compare policies you are comparing how aggressive one company might be vs others in its assumptions.

I am not an insurance expert, but I get the impression that NWML has done pretty well about meeting its projected premiums.

There are a LOT of insurance companies. Using a website to find one is a good idea, but I don't think all companies list their policies on such sites. I would certainly look at some others. USAA often has good prices and you don't need to be in the service to buy life insurance from them. Although it is a bit more work, look around for other policies of the duration you need.

FInancial status of the insurance company: NWML is at the top in terms of financial strength. People disagree about whether you should care. States have guaranty funds to which insurance companies contribute and which will pay the death benefits if a company fails. Because of this, in theory, you can buy the cheapest policy and not worry about the strength of the company. Some states have a cap on the amount of coverage that is protected. If you had a policy and your company fails, then your heirs may get only the cap, rather than the full amount.

A company that runs into financial trouble may start raising its premiums within the maximum in your contract.

If you want an investment with properties similar to whole life- accumulates without annual taxation, based on the investment success of an insurance company, relatively low return but very low risk, then you may be better off doing that through an annuity. You then decide how much to invest in that product independent of how much life insurance you need.

I would get rid of the whole life policies on which you have a loss. Either 1035 exchange if you want to milk as much as you can out of the loss, or just cash them in and eat the loss.

The "3%" or "4.9%" return given for your policy with a gain can be misleading. Typically that means the return as applied to the money that is in the cash value. It does not include the portion of the premium that goes to insurance cost, expenses or commissions. To get a real % return you would have to take the in force illustration and plug it into a spreadsheet. Use the IRR function to tell you what the effective return is on the total amount of money you are paying. It will probably be less.

Some insurance expert, not me, should be able to tell you whether you could roll all 4 policies into one annuity via 1035 exchange and avoid owing tax on the one policy on which you have a gain because you are also converting the 3 policies on which you have a loss.

If it were me, I would get the right amount of term insurance and get out of the whole life policies.
Thanks, this makes sense.

NML doesn't offer 30 years, which is why he presented me with this convoluted option to get to 30 years by combining their two policies. Like I mentioned at the beginning, he's always pushing whole life policies, with him mentioning on this last phone call that we should be saving 20% of our after tax income for retirement, 5% of which he recommends putting into a whole life. I know the 20% number already, but saying 5% in WL is just laughable.

I think my best plan now is to do more research with phone calls to companies like you mentioned and see if their are better options that shown on the websites. I will then cash in all 4 policies, and if the person on the reddit thread I created did their math right, I might pay around $129 in capital gains for the 1988 policy, which doesn't seem like too big of a deal in the grand scheme of this.

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BL
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by BL » Thu Jan 18, 2018 7:30 pm

tj wrote:
Thu Jan 18, 2018 12:05 pm
Have you played with term4sale.com ? It will show you rates for several companies.

You can then get those rates with an independent agent, I used terminsurancebrokers.com
+1
You probably have independent agents in your town or city. They can help you shop.
term4sale has been recommended here, even if just for getting prices and ratings of companies.

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Re: Should I Cash Out my NML Whole Life Insurance?

Post by Benton Bair » Fri Jan 19, 2018 1:25 am

To: ytsejam23

Your loving parents gave you valuable gifts that continue to add value and now can assure your wife will receive money when you die. If the dividends are buying paid up additions every year then you might look at the increase as inflation adjustment that helps maintain purchasing value of the original policy amounts.

What you have are 4 level premium life insurance bonds which will mature and pay cash at time of your death. The fact that you have access to some of the reserves NWML is required to set aside to guarantee payment is overwhelming this whole discussion. These bonds were not optimized to be saving instruments. They are optimized to be a guaranteed benefit for a level price long into your future. Glancing at the numbers it appears you're paying approximately 1% per year for the $80,000 death benefit with the added feature of a waiver of premium if you're disabled. Looks like a valuable asset worth keeping along with the other assets you intend to accumulate as you work your way through life.

If you feel it's bothersome to pay the 1% per year, then you can ask NWML to convert the coverage to a reduced amount of paid up life insurance which will continue increasing with use of dividends. There's no good reason to discontinue 4 good values provided by one of the best companies in the business.

Then you can move on and focus on the additional insurance you want and pay a level price for a shorter time like 10 or 20 years. NWML will provide you with the option to change to a level priced coverage after the initial lower price period ends. Having options is always good. I recognize many BHs believe they will be financial independent at an earlier age, but most people do not meet that mark.

Isn't it nice to know you have assets that are guaranteed to mature and pay cash when expected when many other of your assets maybe less liquid or reduced in value do to market conditions.

If I had what you own I'd gladly hold on to those assets and you can thank your parents for their thoughtfulness for the rest of your life. Some things are worth keeping.

Good luck with growing your prosperity and financial independence all for the purpose of being a free man. :beer

Benton

By the way. If your NWML agent did offer you a million dollar life bond for 30 bps per year, that sounds good and the offer of disability income insurance is a good idea too. If your cash flow allows, you would be doing business with one of the best. It's history is proven.

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Re: Should I Cash Out my NML Whole Life Insurance?

Post by SittingOnTheFence » Fri Jan 19, 2018 2:14 am

When I was 21 I got suckered into buying a whole life policy. I thought the $25000 policy was a huge amount. Later in life, reading recommendations from Consumer's Reports, I bought a term life policy that would cover my mortgage and some living expenses for my wife & 2 children. Fast forward to now, retired, my term life insurance policy was up and the renewal offer was a HUGE premium (of course as a retired person, the risk to company is much higher). I declined. I believe I don't need life insurance. I have a nice retirement nest egg and no mortgage, children grown and gone. I still have my $25k whole life because the dividend pays the premium. I personally believe the Whole Life policy is merely a glorified savings acct. Of course, when you are young and have obligations you need *something*. If your whole life policy have a provision for dividends to pay the premium then it seems to me that *maybe* it is reasonable to do that. Just remember not to buy more Whole Life. It's much more efficient to buy term insurance.

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Re: Should I Cash Out my NML Whole Life Insurance?

Post by ivk5 » Fri Jan 19, 2018 5:55 am

ytsejam23 wrote:
Wed Jan 17, 2018 4:46 pm
NML [...] suggested if I want to do 30 years, I get a term to age 80 to cover the first 10 years to make up the difference between a 30 year policy, with the premium going up annually.
Whatever you decide your current term life needs are, get it in place today. A plan to cover the outyears by buying a 20y policy in 2028 does not seem prudent if you have a need for coverage for those outyears today. In the next 10y you may develop a health issue that makes it prohibitively expensive or impossible to obtain a 20y policy at that time.

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Re: Should I Cash Out my NML Whole Life Insurance?

Post by ytsejam23 » Fri Jan 19, 2018 10:05 am

SittingOnTheFence wrote:
Fri Jan 19, 2018 2:14 am
When I was 21 I got suckered into buying a whole life policy. I thought the $25000 policy was a huge amount. Later in life, reading recommendations from Consumer's Reports, I bought a term life policy that would cover my mortgage and some living expenses for my wife & 2 children. Fast forward to now, retired, my term life insurance policy was up and the renewal offer was a HUGE premium (of course as a retired person, the risk to company is much higher). I declined. I believe I don't need life insurance. I have a nice retirement nest egg and no mortgage, children grown and gone. I still have my $25k whole life because the dividend pays the premium. I personally believe the Whole Life policy is merely a glorified savings acct. Of course, when you are young and have obligations you need *something*. If your whole life policy have a provision for dividends to pay the premium then it seems to me that *maybe* it is reasonable to do that. Just remember not to buy more Whole Life. It's much more efficient to buy term insurance.
I feel like my parents were suckered into buying the policies as well for me and my brother. He cashed his out a couple of years ago because he already had life insurance through his work that was I think $21/month for far more death benefit, and he doesn't have kids or a partner, so he probably doesn't even need it. It looks to me that the insurance agent gets a large commission for Whole Life, and used a friendly demeanor and sales tactics to have my parents continually buy me the insurance.

My post was long above where I mentioned the dividend to pay the premium approach, but it will be 14 years until that happens. It seems to me from everything I've read on the wiki it's smarter to put my money elsewhere.

I agree it seems like a glorified savings account, only with the caveat that it's not worth as much as the money I put in, and someone only gets the true benefit if I die, which isn't even that large an amount. The 1988 policy, if I use dividends to pay the premium, is worth ~$17K for the next 14 years, and then grows quite slowly.

ytsejam23
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by ytsejam23 » Fri Jan 19, 2018 10:09 am

ivk5 wrote:
Fri Jan 19, 2018 5:55 am
ytsejam23 wrote:
Wed Jan 17, 2018 4:46 pm
NML [...] suggested if I want to do 30 years, I get a term to age 80 to cover the first 10 years to make up the difference between a 30 year policy, with the premium going up annually.
Whatever you decide your current term life needs are, get it in place today. A plan to cover the outyears by buying a 20y policy in 2028 does not seem prudent if you have a need for coverage for those outyears today. In the next 10y you may develop a health issue that makes it prohibitively expensive or impossible to obtain a 20y policy at that time.
Exactly, that's why his suggestion that I get a term 80 policy for 10 years and then get a 20 year term policy makes no sense. It's because I want a 30 year policy, and he doesn't have it through his company for that amount of time, so he's trying to make it work so I buy more from him and get the coverage I want, even though it's not to my overall benefit as illustrated through the assumed ~$9K difference in cost over the lifetime of the policies which as you mention, presumes that I have the same exact health in 10 years as I do now. While likely, it seems like an unnecessary risk, especially with it costing more in the long run. I guess it makes sense if you make a commission on it.

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Re: Should I Cash Out my NML Whole Life Insurance?

Post by Benton Bair » Fri Jan 19, 2018 2:50 pm

"and someone only gets the true benefit if I die" :oops:

How about that! Designed specifically for that purpose. Why do most BHs continue comparing long term life insurance policies with other assets which don't provide guarantees. You didn't buy it for you, it is for another persons benefit.

Look at the risks you face if your loved one you rely on dies. It's likely you'll have to monetize many services that person provided to you. When does your dependency on them end? It seems to me the beneficiary of the contract should be the decider as to how much and for how long the need exists. The beneficiary should be the owner and protect their own interests instead of relying on you to do it for them. No one feels the loss greater than the person who incurs the pain and deprivation.

Stop trying to reverse engineer a financial product that you can't possibly have access to all the factors which determine its price. :idea:

afan
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by afan » Fri Jan 19, 2018 2:55 pm

There are lots of insurance companies and lots of agents. It is time consuming but worth it to shop. Try a couple of independent agents. Contact the big companies that have captive agents or do direct sales. If one company does not offer what you want, move on.

Planning to buy more insurance 10 or 20 years from now would be crazy.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

Benton Bair
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by Benton Bair » Fri Jan 19, 2018 3:04 pm

Why is it crazy to buy more life insurance 10 or 20 years in the future? :confused The reason buyers are motivated to pay for limited level priced insurance is because the household cash flow is stressed with other needs competing for money.

Later in life when you're making more money than you've ever made in your life is exactly the time to pay for longer term insurance. Also, the vision of a guaranteed loss becomes more apparent. It's the time to use some of that substantial wealth accumulated using the BH way.

ytsejam23
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by ytsejam23 » Fri Jan 19, 2018 3:06 pm

Benton Bair wrote:
Fri Jan 19, 2018 2:50 pm
"and someone only gets the true benefit if I die" :oops:

How about that! Designed specifically for that purpose. Why do most BHs continue comparing long term life insurance policies with other assets which don't provide guarantees. You didn't buy it for you, it is for another persons benefit.

Look at the risks you face if your loved one you rely on dies. It's likely you'll have to monetize many services that person provided to you. When does your dependency on them end? It seems to me the beneficiary of the contract should be the decider as to how much and for how long the need exists. The beneficiary should be the owner and protect their own interests instead of relying on you to do it for them. No one feels the loss greater than the person who incurs the pain and deprivation.

Stop trying to reverse engineer a financial product that you can't possibly have access to all the factors which determine its price. :idea:
We both make approximately the same amount of income. Yes, you're correct in that I'm buying this for another person's benefit, which is why it makes more sense to purchase a product at a lower cost ($57/month vs. $73/month) that provides a larger payout ($800K vs $78K).

Taking a quote of "and someone only gets the true benefit if I die" and framing it the way you have doesn't make sense. My whole point is that I'm paying a larger premium for a service that provides 10x LESS to my partner than what I could be buying.

Honestly, a lot of your comments on this have me scratching my head, as you have a presumption that I have not spoken to my partner about her thoughts on any of this. She is all for paying less per month for a greater death benefit, though she says she would much rather I live than her get a large sum of money upon my end.

Yes, it's nice to "have assets that are guaranteed to mature and pay cash", but they aren't growing at that larger of a rate. I could put money into a savings account that has .05% interest and it's still going to mature and pay cash. I have the in force illustrations for all of these policies, the cash benefit does not grow at a great rate and it seems to be that the greatest asset with these they offer (besides the death benefit) is that I can take a loan out at 8% interest against what my policy is worth, which is also non-nonsensical since I can get better rates for the same amount from other institutions.

ytsejam23
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by ytsejam23 » Fri Jan 19, 2018 3:08 pm

afan wrote:
Fri Jan 19, 2018 2:55 pm
There are lots of insurance companies and lots of agents. It is time consuming but worth it to shop. Try a couple of independent agents. Contact the big companies that have captive agents or do direct sales. If one company does not offer what you want, move on.

Planning to buy more insurance 10 or 20 years from now would be crazy.
I agree, now is the time to buy and lock in a good premium. I'm going to make a list of independent agents and find out what my best deal is.

Benton Bair
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by Benton Bair » Fri Jan 19, 2018 3:47 pm

I agree with you that buying a greater amount of life insurance is a good idea. We started writing about the merits of keeping assets you already own and I think it's a good idea to preserve that value.

Now we move on to the issue of more insurance in the form of limited level priced contract. This is where many believe lowest price represents better value. The better contracts aren't going to be the lowest price for a good reason. Value has its own price. The big mutuals will offer the better options like continuation beyond the initial level priced period. They are the ones to offer accelerated benefits, chronic care, critical care and waiver of premium if disabled. The big mutuals have weathered all kinds of economic environments and they are the ones to deliver better value through low interest rate times and beyond.

A knowledgeable agent is essential to help identify value where you don't know where to look nor the questions to ask. They are the ones who can advise how to arrange different beneficiaries when varied circumstances occur. For those who believe a quoting service online will provide the insight of a person you sit down with and talk about issues, they are very mistaken. Anyone can be a low price order taker. Knowledge is gained with experience like any other profession. Also, your agent wanted you to consider disability income insurance. Only with help of an agent can you wade through the variety of coverages. No way can that be done over the phone. I believe your current NWML agent can add value if sit and talk about the issues of risk and the consequences. When you've asked all your questions, then ask one more of your agent, what else do we need to know to make our best decision? I good agent will gladly share information you would never imagine because they know you
're engaged and not perceiving him as an adversary.

ivk5
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by ivk5 » Fri Jan 19, 2018 4:41 pm

With all respect to Benton Bair, there is no reason to make this more complicated than it needs to be. You need a company with a strong balance sheet contractually committed to paying a known amount to your beneficiary if you die within an agreed time period in exchange for a definitive premium. Unless you have a specific need for the other bells and whistles, you don't. This is a commodity product.
Benton Bair wrote:
Fri Jan 19, 2018 3:04 pm
Why is it crazy to buy more life insurance 10 or 20 years in the future?
If you have a 30-year need, you want to insure that 30-year need now. You don't want to kick the can down the road 10 yrs and hope you can still make suitable arrangements at that time at an affordable rate.

Nothing wrong with periodically re-evaluating and increasing OR decreasing coverage if needs have changed.

(Naturally any time you are replacing a policy, don't drop old policy until intended replacement is in force.)

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Re: Should I Cash Out my NML Whole Life Insurance?

Post by ThePrince » Fri Jan 19, 2018 10:54 pm

Benton Bair wrote:
Fri Jan 19, 2018 1:25 am
To: ytsejam23

Your loving parents gave you valuable gifts that continue to add value and now can assure your wife will receive money when you die. If the dividends are buying paid up additions every year then you might look at the increase as inflation adjustment that helps maintain purchasing value of the original policy amounts.

What you have are 4 level premium life insurance bonds which will mature and pay cash at time of your death. The fact that you have access to some of the reserves NWML is required to set aside to guarantee payment is overwhelming this whole discussion. These bonds were not optimized to be saving instruments. They are optimized to be a guaranteed benefit for a level price long into your future. Glancing at the numbers it appears you're paying approximately 1% per year for the $80,000 death benefit with the added feature of a waiver of premium if you're disabled. Looks like a valuable asset worth keeping along with the other assets you intend to accumulate as you work your way through life.

If you feel it's bothersome to pay the 1% per year, then you can ask NWML to convert the coverage to a reduced amount of paid up life insurance which will continue increasing with use of dividends. There's no good reason to discontinue 4 good values provided by one of the best companies in the business.

Then you can move on and focus on the additional insurance you want and pay a level price for a shorter time like 10 or 20 years. NWML will provide you with the option to change to a level priced coverage after the initial lower price period ends. Having options is always good. I recognize many BHs believe they will be financial independent at an earlier age, but most people do not meet that mark.

Isn't it nice to know you have assets that are guaranteed to mature and pay cash when expected when many other of your assets maybe less liquid or reduced in value do to market conditions.

If I had what you own I'd gladly hold on to those assets and you can thank your parents for their thoughtfulness for the rest of your life. Some things are worth keeping.

Good luck with growing your prosperity and financial independence all for the purpose of being a free man. :beer

Benton

By the way. If your NWML agent did offer you a million dollar life bond for 30 bps per year, that sounds good and the offer of disability income insurance is a good idea too. If your cash flow allows, you would be doing business with one of the best. It's history is proven.
$842 in premiums per year for $80k in life Insurance is a rip-off. What is more, the life insurance company keeps the cash value when the insured dies. How backwards!

Benton Bair
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by Benton Bair » Fri Jan 19, 2018 11:18 pm

ThePrince wrote:
Fri Jan 19, 2018 10:54 pm
Benton Bair wrote:
Fri Jan 19, 2018 1:25 am
To: ytsejam23

Your loving parents gave you valuable gifts that continue to add value and now can assure your wife will receive money when you die. If the dividends are buying paid up additions every year then you might look at the increase as inflation adjustment that helps maintain purchasing value of the original policy amounts.

What you have are 4 level premium life insurance bonds which will mature and pay cash at time of your death. The fact that you have access to some of the reserves NWML is required to set aside to guarantee payment is overwhelming this whole discussion. These bonds were not optimized to be saving instruments. They are optimized to be a guaranteed benefit for a level price long into your future. Glancing at the numbers it appears you're paying approximately 1% per year for the $80,000 death benefit with the added feature of a waiver of premium if you're disabled. Looks like a valuable asset worth keeping along with the other assets you intend to accumulate as you work your way through life.

If you feel it's bothersome to pay the 1% per year, then you can ask NWML to convert the coverage to a reduced amount of paid up life insurance which will continue increasing with use of dividends. There's no good reason to discontinue 4 good values provided by one of the best companies in the business.

Then you can move on and focus on the additional insurance you want and pay a level price for a shorter time like 10 or 20 years. NWML will provide you with the option to change to a level priced coverage after the initial lower price period ends. Having options is always good. I recognize many BHs believe they will be financial independent at an earlier age, but most people do not meet that mark.

Isn't it nice to know you have assets that are guaranteed to mature and pay cash when expected when many other of your assets maybe less liquid or reduced in value do to market conditions.

If I had what you own I'd gladly hold on to those assets and you can thank your parents for their thoughtfulness for the rest of your life. Some things are worth keeping.

Good luck with growing your prosperity and financial independence all for the purpose of being a free man. :beer

Benton

By the way. If your NWML agent did offer you a million dollar life bond for 30 bps per year, that sounds good and the offer of disability income insurance is a good idea too. If your cash flow allows, you would be doing business with one of the best. It's history is proven.
$842 in premiums per year for $80k in life Insurance is a rip-off. What is more, the life insurance company keeps the cash value when the insured dies. How backwards!
Please learn some more about participating life insurance contracts before saying such things. The annual dividends can buy additional paid up insurance and or annual term insurance in the amount of the cash value. The cash value is part of the reserve the company is required by law to set aside to pay the future claim. A company does not keep the cash value. When a claim is paid the amount will exceed the initial face amount of the policy. The older the policy the greater amount over and above the original issued amount.

How do you access the reserve established to pay a claim if you have a 10, 20 or 30 year level priced contract? You don't, because it's not required by law.

CedarWaxWing
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by CedarWaxWing » Fri Jan 19, 2018 11:32 pm

A song my MIL still sings about the endurance of an insurance salesman. (Shie is 95.)

It seems somewhat accurate.

https://www.youtube.com/watch?v=HMhqwN6D9YI

M

Benton Bair
Posts: 135
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by Benton Bair » Fri Jan 19, 2018 11:46 pm

CedarWaxWing wrote:
Fri Jan 19, 2018 11:32 pm
A song my MIL still sings about the endurance of an insurance salesman. (Shie is 95.)

It seems somewhat accurate.

https://www.youtube.com/watch?v=HMhqwN6D9YI

M
That's a good one. Here's another...https://youtu.be/xkW_ZkMtmlQ

Nate79
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by Nate79 » Sat Jan 20, 2018 1:17 am

Hey, a company ripped your parents off by selling you this whole life junk and now let's give this company a chance to try and sell you some more higher priced products. Term life should be shopped around thru any online or independent broker. Do not spend one second working with these scam artists who would dare sell you whole life and it's ugly cousin products.

Benton Bair
Posts: 135
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by Benton Bair » Sat Jan 20, 2018 2:02 am

Nate79 wrote:
Sat Jan 20, 2018 1:17 am
Hey, a company ripped your parents off by selling you this whole life junk and now let's give this company a chance to try and sell you some more higher priced products. Term life should be shopped around thru any online or independent broker. Do not spend one second working with these scam artists who would dare sell you whole life and it's ugly cousin products.
...and you know this because you read the policies and viewed current and future estimates by one of the most reputable mutual life insurance companies in the country? In generic terms you're referring to a participating level premium term until age 100 bond. That does run a little longer than any 20 year quote found on line, doesn't it? Those catastrophic bonds guarantee payment when claims are submitted whenever that may be. Which will be some time between now and :oops:

Nate79
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by Nate79 » Sat Jan 20, 2018 9:03 am

Benton Bair wrote:
Sat Jan 20, 2018 2:02 am
Nate79 wrote:
Sat Jan 20, 2018 1:17 am
Hey, a company ripped your parents off by selling you this whole life junk and now let's give this company a chance to try and sell you some more higher priced products. Term life should be shopped around thru any online or independent broker. Do not spend one second working with these scam artists who would dare sell you whole life and it's ugly cousin products.
...and you know this because you read the policies and viewed current and future estimates by one of the most reputable mutual life insurance companies in the country? In generic terms you're referring to a participating level premium term until age 100 bond. That does run a little longer than any 20 year quote found on line, doesn't it? Those catastrophic bonds guarantee payment when claims are submitted whenever that may be. Which will be some time between now and :oops:
Thank you Mr whole life salesman. Reputable company must be a joke. Reputable companies do not sell whole life, one of the worst products on the market.

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BL
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by BL » Sat Jan 20, 2018 9:09 am

ytsejam23 wrote:
Fri Jan 19, 2018 3:08 pm
afan wrote:
Fri Jan 19, 2018 2:55 pm
There are lots of insurance companies and lots of agents. It is time consuming but worth it to shop. Try a couple of independent agents. Contact the big companies that have captive agents or do direct sales. If one company does not offer what you want, move on.

Planning to buy more insurance 10 or 20 years from now would be crazy.
I agree, now is the time to buy and lock in a good premium. I'm going to make a list of independent agents and find out what my best deal is.
Sounds like you have a plan. Good luck. You want a fair price from a well-rated company. By the way, find out what upper limit your state "insures" on life insurance, then consider limiting the policy with a single company to that maximum, for added safety. I think most states "cover" at least a 1-2 million dollar policy. It is not real insurance, but sounds like a mutual agreement that another company will take it over if a company fails.

Nate79
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by Nate79 » Sat Jan 20, 2018 9:29 am

ytsejam23 wrote:
Thu Dec 21, 2017 3:09 pm
Hello,
I've been thoroughly reading these forums and come to the conclusion I need to switch my current life insurance situation from what I have outlined below to a 25 or 30 year term policy. My parents bought me a policy when I was 6, and were I guess talked into 3 more since then, so I have 4 total whole life policies that offer very little payout if I die tomorrow.

Long story short, I (35 male) married this year, and in changing the beneficiary from my parents to my wife (31) The 'financial adviser' from NML that contacted me is trying to get me to buy us each $1M whole life policies with $3000/yr premiums to start with, and has been pushing disability as well. The phrases he's been using (term is like renting, wouldn't you rather own?) were red flags, and going through the forums it's similar to others that have posted, which usually have many replies saying "run away from this person!"

My issue is whether to cash out the whole life, as I am unsure how to read the inforce illustration I was provided. I don't trust talking to my new "adviser", so I'm looking for advice here on whether I should cash out this policy, since one of them is 30 years old. This is all new to me and I'm trying to do what's best.

Facts:
4 Whole life 90 policies, purchased in 1988, 2004, 2007, & 2009
Initial Amount: $70,000
Total Death Benefit (I think): $79,008
2017 Divided: $101.27

1988 (As of August, 2017): Basic $10K, Div. $7,356, total: $17,356
Cash value Increase: $196.35
2017 Dividend: $46.68
Cash Value: $3,564.53, Cost Basis: $2,700.48 Taxable Gain if Surrendered: $864.05

2004 (As of Sept, 2017): Basic $20K, Div. $1,124, Total: $21,124
Cash value Increase: $242.50
2017 Dividend: $30.81
Cash Value: $2,224.09, Cost Basis: $2,964.13 Taxable Gain if Surrendered: $0

2007 (As of June, 2017): Basic $20K, Div. $313, total: $20,313
Cash value Increase: $211.46
2017 Dividend: $13.30
Cash Value: $1,572.21, Cost Basis: $2,405.40 Taxable Gain if Surrendered: $0

2009 (As of July, 2017): Basic $20K, Div. $215, total: $20,215
Cash value Increase: $179.38
2017 Dividend: $10.48
Cash Value: $1,092.55, Cost Basis: $2,268.40 Taxable Gain if Surrendered: $0

Total Cash Value Guaranteed: $8,786
Dividends used to: increase cash value and coverage

Monthly Premium: $73.02 total

Yearly Premium: $842
Yearly Premium by policy:
1988: $105
2004: $222
2007: $235
2009: $279

The illustration shows
2017-18 $9,212 guaranteed cash value
2018-19 $9,997 guaranteed cash value
2019-20 $10,809 guaranteed cash value

I don't fully understand all the numbers, but it seems like a bad deal overall. Should I surrender and cash in all of them, including the 1988 policy after I start a new term policy? Or does it make any sense to keep any of them, with the one that 30 years old I see in some postings saying that after 15 years it's fine to keep them ? I have more information if needed as well. Thanks in advance!
You are right to put "financial advisor" in quotes. Insurance salesman are not financial advisors. Financial advisors do not peddle whole life, at least not reputable ones who are fiduciaries who have your interest in mind vs their boat payment.

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Re: Should I Cash Out my NML Whole Life Insurance?

Post by afan » Sat Jan 20, 2018 9:45 am

Benton Bair wrote:
Fri Jan 19, 2018 3:47 pm

Now we move on to the issue of more insurance in the form of limited level priced contract. This is where many believe lowest price represents better value. The better contracts aren't going to be the lowest price for a good reason. Value has its own price. The big mutuals will offer the better options like continuation beyond the initial level priced period. They are the ones to offer accelerated benefits, chronic care, critical care and waiver of premium if disabled. The big mutuals have weathered all kinds of economic environments and they are the ones to deliver better value through low interest rate times and beyond.

A knowledgeable agent is essential to help identify value where you don't know where to look nor the questions to ask. They are the ones who can advise how to arrange different beneficiaries when varied circumstances occur. For those who believe a quoting service online will provide the insight of a person you sit down with and talk about issues, they are very mistaken. Anyone can be a low price order taker. Knowledge is gained with experience like any other profession. Also, your agent wanted you to consider disability income insurance. Only with help of an agent can you wade through the variety of coverages. No way can that be done over the phone. I believe your current NWML agent can add value if sit and talk about the issues of risk and the consequences. When you've asked all your questions, then ask one more of your agent, what else do we need to know to make our best decision? I good agent will gladly share information you would never imagine because they know you
're engaged and not perceiving him as an adversary.
What if all someone needs is a company to take the order for the lowest priced insurance?

The hypothetical advantages of dealing with higher priced companies apply to relatively few people, and it is difficult to figure out how much they are worth. For someone who simply needs 30 years of plain, standard, term insurance, the lowest price from a reputable company is all they need. Why pay for extras of little or no value?

Why pay for disability waiver if one has enough disability insurance? Why do you need an agent to change beneficiaries? Plenty of companies offer the option to continue the insurance beyond the level period- at much higher rates reserved for people who cannot medically qualify for a new policy. If you think you might want this, then shop for policies that include it. Little of this is any great mystery. If someone wants to charge you to help you shop do what you would do with anything else you would purchase: ask them how much their services cost.

It is a good idea to use one or more independent agents. But do not overlook those companies that sell direct to customers and might not be listed on the shopping websites or be contacted through the independent agents.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

technovelist
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Re: Should I Cash Out my NML Whole Life Insurance?

Post by technovelist » Sat Jan 20, 2018 10:48 pm

Benton Bair wrote:
Fri Jan 19, 2018 3:04 pm
Why is it crazy to buy more life insurance 10 or 20 years in the future? :confused The reason buyers are motivated to pay for limited level priced insurance is because the household cash flow is stressed with other needs competing for money.

Later in life when you're making more money than you've ever made in your life is exactly the time to pay for longer term insurance. Also, the vision of a guaranteed loss becomes more apparent. It's the time to use some of that substantial wealth accumulated using the BH way.
Is the 10-year policy convertible to another term policy at rates that are known today?

I assume that is not the case. If not, can you guarantee that the OP will remain insurable at good rates into the future?

Obviously not. That's why it's better to buy 30-year term now rather than some 10-year policy now and 20-year term 10 years from now.
In theory, theory and practice are identical. In practice, they often differ.

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Re: Should I Cash Out my NML Whole Life Insurance?

Post by technovelist » Sat Jan 20, 2018 10:50 pm

Nate79 wrote:
Sat Jan 20, 2018 9:03 am
Benton Bair wrote:
Sat Jan 20, 2018 2:02 am
Nate79 wrote:
Sat Jan 20, 2018 1:17 am
Hey, a company ripped your parents off by selling you this whole life junk and now let's give this company a chance to try and sell you some more higher priced products. Term life should be shopped around thru any online or independent broker. Do not spend one second working with these scam artists who would dare sell you whole life and it's ugly cousin products.
...and you know this because you read the policies and viewed current and future estimates by one of the most reputable mutual life insurance companies in the country? In generic terms you're referring to a participating level premium term until age 100 bond. That does run a little longer than any 20 year quote found on line, doesn't it? Those catastrophic bonds guarantee payment when claims are submitted whenever that may be. Which will be some time between now and :oops:
Thank you Mr whole life salesman. Reputable company must be a joke. Reputable companies do not sell whole life, one of the worst products on the market.
There are circumstances in which whole life makes sense.

They apply to a tiny fraction of the population, mainly those who have estates in excess of the estate tax exemption limits.

For everyone else, their primary use is to line the pockets of the salesman.
In theory, theory and practice are identical. In practice, they often differ.

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