Whole Life - We're doing it. What to look for?

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SwampDonkey
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Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Mon Jul 09, 2018 9:50 am

Background 1: SO is mid-30's and nearing the 5-year point on a 30-year term policy with Navy Mutual. We received a letter from NM informing us of their policy to allow us to also buy whole life within the original 5-years of the term, without the requirement for a new medical examination (further research discovered this is fairly standard across the insurance industry). The "no new medical examination" is key for us as my SO was recently diagnosed with a medical condition that will make any future insurance rates extremely high (note, she may need a serious surgery in the next 10, 20, 40 years?). Bottom Line - We want to lock in insurance at an affordable rate while still able.

Background 2: A recent unexpected death in our family left everyone shocked and saddened for an extended period of time. This was the first time either myself or my SO had been in the immediate family of someone who passed and we saw first-hand how a lack of insurance adds an incredible amount of stress on the surviving widow. Note, although the widow is relatively financially secure, the first 1-2 weeks after the death, when they were trying to figure out the financial picture, was exasperated by the lack of near immediate income from an insurance policy. Having the "comfort" of a known-immediate lump-sum income would have been worth it's weight in gold for the widow and her children. Bottom Line - After seeing how the situation played out in our family, we want a smallish (100k) guaranteed payment that will greatly reduce any initial stressors and anxiety.

Research: I have fully vetted BH and in my initial search for term, I even mentioned how BH has turned me away from Whole Life. Thread is here: viewtopic.php?t=117383. I am fully aware investing the difference between our current term policy and a whole life policy should result in a higher end amount, based upon average market returns. However, due to my SO's medical condition, which limits a future term policy, and our desire to have a guaranteed (and stress-free/immediate) payout, we are going to purchase a WL policy.
I have also found it interesting that one of the major knocks against WL is the amount of principal that goes towards salesman's commissions. With Navy Mutual, they claim their salesman are commission-free and the company is a non-profit. While these are probably true statements, I suspect a fair amount of principal is still applied to a "commission-like" fee of some sort. Thoughts?

Illustration:

Underwriting Classification: Standard
Initial Dividend Option: Buy Paid Up Additions
1035 Exchange Basis: $0.00

DEATH BENEFIT
Base Face Amount: $100,000.00
PUAR Face Amount: $0.00
Total Death Benefit: $100,000.00

PREMIUM
Premium Mode: Monthly
Premium Type: 20 Pay
Initial Non-1035 Amount: $0.00
1035 Exchange Amount: $0.00
Modal Base Premium (excludes 1035): $76.68
Modal PUA Premium: $0.00
Modal Rider Premium: $0.00
Total First Year Premium: $920.16

Question: Does this illustration look fair and normal? Is there anything I should request be changed or added? Are PUAs a good or bad idea?

Thanks in advance for your advice.
Last edited by SwampDonkey on Mon Jul 09, 2018 11:29 pm, edited 1 time in total.

bloom2708
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Re: Whole Life - We're doing it. What to look for?

Post by bloom2708 » Mon Jul 09, 2018 10:00 am

Why not buy more Term insurance instead of Whole Life?

Very sorry for the loss in the family, but don't do anything quickly in response to something bad happening.

Search on Whole or Universal Life and read threads on these topics. Most buy and then try to figure out how to get out. It is mostly junk.

You build up cash value, but the policy pays out the face value upon death. Your savings account (cash value) goes away. Fees are high and return is low.

Buy more Term insurance.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

BogleMelon
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Re: Whole Life - We're doing it. What to look for?

Post by BogleMelon » Mon Jul 09, 2018 10:05 am

Whole life is a crab product. Nothing you can look for to make it a good product. It is like asking, what ingredient to look for to buy a healthy donut!
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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HomerJ
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Re: Whole Life - We're doing it. What to look for?

Post by HomerJ » Mon Jul 09, 2018 10:06 am

SwampDonkey wrote:
Mon Jul 09, 2018 9:50 am
Background 1: SO is mid-30's and nearing the 5-year point on a 30-year term policy with Navy Mutual.
Having the "comfort" of a known-immediate lump-sum income would have been worth it's weight in gold for the widow and her children. Bottom Line - After seeing how the situation played out in our family, we want a smallish (100k) guaranteed payment that will greatly reduce any initial stressors and anxiety.
You still have 25 years of $250k at a much smaller price.

If your SO (Heaven forbid) dies anytime in the 25 years, you're already covered for the situation you detailed above.

If your SO lives 25+ years, you won't need the money because you'll have plenty of it by then and the kids will be grown.

But if this gives you peace of mind, then go for it. My apologies for not directly answering your question if this is a good policy.

Just note you already have 25 years of peace of mind locked up. You'll be 60 by then.
The J stands for Jay

soccerrules
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Re: Whole Life - We're doing it. What to look for?

Post by soccerrules » Mon Jul 09, 2018 10:11 am

sorry to hear about the medical issues and the death in your family.

I would encourage you to do some long term financial planning out 25-30 years. It is a little hard to know for sure how things will look in that long of a time frame but if can help you with these decisions some.

If you are well on your way with savings and plan to continue with tax-deferred, index investing, you may not want/need the life insurance in 25 years.

I have had life insurance the last 20+ years and plan to drop it when I turn 60 and retire (7 years). I will no longer need it (kids on own, no need to replace income because savings will do that)

I would look into buying more term as an option as well.
Don't let your outflow exceed your income or your upkeep will be your downfall.

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HomerJ
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Re: Whole Life - We're doing it. What to look for?

Post by HomerJ » Mon Jul 09, 2018 10:14 am

soccerrules wrote:
Mon Jul 09, 2018 10:11 am
I would look into buying more term as an option as well.
They probably can't buy MORE term because of the pre-existing condition now.
The J stands for Jay

GodelianKnot
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Re: Whole Life - We're doing it. What to look for?

Post by GodelianKnot » Mon Jul 09, 2018 10:18 am

Just because they don't require a new medical exam, doesn't mean they won't ask you a few questions to assess any potential health changes. (And purposefully lying about your medical condition would be insurance fraud, and would let them deny you a payout if they figured it out.) So, you might not want to depend on this "no medical exam" freebie.

navyitaly
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Re: Whole Life - We're doing it. What to look for?

Post by navyitaly » Mon Jul 09, 2018 10:19 am

I am a NMAA customer with a whole life policy I bought in 2003 and one for my wife in 2004..both are paid in full now...

Takeaways, everything you pay in you can get out if you cancel...so if you cancel, they will lose some money...but your values won't go up for awhile if you keep it. They've changed their policies to pay less than in years before..the Flagship or whatever gimmick they call it is just another way for them to pay you less....

Would I do it now, NO, but since my policy is grandfathered, after expenses I'm yielding 4.5% per year now...I can't get that anywhere else with almost no risk (unless they went out of business)....but, don't expect these yields in new policies. My interest rate is 5.5% - expenses so it's like 4.5%.

Any other ?s PM me..but great company! happy to do business with them.

Also non-profit doesn't mean no profit..it means profits reinvested with them...

bberris
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Re: Whole Life - We're doing it. What to look for?

Post by bberris » Mon Jul 09, 2018 11:27 am

There seems to be some confusion about what "non-profit" means. It does NOT mean that they sell products at cost. Non profits are allowed to retain earnings. This would be called a profit, except that the company is non-profit. They can also charge whatever the market will bear for product, and pay it out as salary.

Buying from a non-profit does not mean you are getting good value, or the lowest price. It just means the company that sold it to you will probably not pay income tax on the earnings.

Stinky
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Re: Whole Life - We're doing it. What to look for?

Post by Stinky » Mon Jul 09, 2018 11:28 am

Does SO really need $100k when SO is 60+ years old? Wifey and I have dropped our term insurance as we're in our 60s, with no children to support and burial taken care of. Do you expect to have insurance needs (disabled child, etc.) at age 60+ that will require insurance?

If SO really does need $100k of insurance at age 60+, then permanent insurance issued now by Navy Federal may be a good buy. You probably can't get a cheaper policy through any other source, given SO's medical condition. But you should check that out with other insurers to make sure before you buy from Navy Federal.

I note that you were quoted a 20-pay life policy. You could save some monthly premium dollars by buying true whole life, with premiums payable for the whole of life, rather than 20-pay life.
Actuaries have interaction with all parts of an insurance company. That allows them to annoy EVERYONE simultaneously.

Rupert
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Re: Whole Life - We're doing it. What to look for?

Post by Rupert » Mon Jul 09, 2018 11:43 am

SwampDonkey wrote:
Mon Jul 09, 2018 9:50 am

Background 2: A recent unexpected death in our family left everyone shocked and saddened for an extended period of time. This was the first time either myself or my SO had been in the immediate family of someone who passed and we saw first-hand how a lack of insurance adds an incredible amount of stress on the surviving widow. Note, although the widow is relatively financially secure, the first 1-2 weeks after the death, when they were trying to figure out the financial picture, was exasperated by the lack of near immediate income from an insurance policy. Having the "comfort" of a known-immediate lump-sum income would have been worth it's weight in gold for the widow and her children. Bottom Line - After seeing how the situation played out in our family, we want a smallish (100k) guaranteed payment that will greatly reduce any initial stressors and anxiety.
A life insurance policy will not necessarily pay out in 1-2 weeks. There was a thread here recently about someone still waiting for the check months after the death occurred. At the very least, an insurance company is going to want a death certificate before paying out. How quickly a certificate is issued will vary by jurisdiction. So a WL policy is no substitute for an appropriately-sized emergency fund that both partners have access to (and, importantly, know how to access), which can be used to keep the family afloat during the initial weeks following a death.

robebibb
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Re: Whole Life - We're doing it. What to look for?

Post by robebibb » Mon Jul 09, 2018 11:54 am

If you have a sufficient emergency fund and both spouses are kept up to speed on financial assets and liabilities I see no need for permanent insurance. If you believe your wife now has a significantly shorter life expectancy due to her diagnosis then it could be financially beneficial to purchase the WL policy but that is a separate issue.

LarryAllen
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Re: Whole Life - We're doing it. What to look for?

Post by LarryAllen » Mon Jul 09, 2018 11:57 am

Do not believe all the negativity you might hear/read. Similar to annuities whole life can be great in the right circumstance. Some people just hear the words and have to say something negative. I should add I do not sell these products but am professionally familiar with them and their applications.

I would encourage you to check 20 year term (and whole life) rates even with medical condition as a "rated" policy may be cheaper than your convertible whole life product. The convertible term products, like you are looking to exercise, typically convert to the highest retail whole life if that makes sense. So it's not the best usually. If it's the only option then so be it but I would verify your options first.

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HomerJ
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Re: Whole Life - We're doing it. What to look for?

Post by HomerJ » Mon Jul 09, 2018 12:04 pm

LarryAllen wrote:
Mon Jul 09, 2018 11:57 am
Do not believe all the negativity you might hear/read. Similar to annuities whole life can be great in the right circumstance. Some people just hear the words and have to say something negative.
What exactly are you talking about here? This thread doesn't appear to be full of thoughtless negative comments. I'm curious why you responded this way.
I would encourage you to check 20 year term (and whole life) rates even with medical condition as a "rated" policy may be cheaper than your convertible whole life product. The convertible term products, like you are looking to exercise, typically convert to the highest retail whole life if that makes sense. So it's not the best usually. If it's the only option then so be it but I would verify your options first.
This is good advice.
The J stands for Jay

LarryAllen
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Re: Whole Life - We're doing it. What to look for?

Post by LarryAllen » Mon Jul 09, 2018 12:24 pm

HomerJ wrote:
Mon Jul 09, 2018 12:04 pm
LarryAllen wrote:
Mon Jul 09, 2018 11:57 am
Do not believe all the negativity you might hear/read. Similar to annuities whole life can be great in the right circumstance. Some people just hear the words and have to say something negative.
What exactly are you talking about here? This thread doesn't appear to be full of thoughtless negative comments. I'm curious why you responded this way.
That is usually where these threads go so if not already it will likely go that way and/or he might hear negativity from places outside BH. I don't think my post singled out BH. I am sorry if you feel defensive. Have a great day!

wd123
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Re: Whole Life - We're doing it. What to look for?

Post by wd123 » Mon Jul 09, 2018 12:25 pm

I was able to get $500k/ 20 year term life insurance for about $1500/year with a congenital bicuspid aortic valve that will most likely need some sort of surgical intervention in the next 25 years (30 YO now). That plus what work provides will have to be enough.

SelectQuote is who I went through and they used Lincoln Financial Group. I rated just above "DO NOT INSURE" for a guy who does not smoke or drink and has normal BMI.

Nate79
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Re: Whole Life - We're doing it. What to look for?

Post by Nate79 » Mon Jul 09, 2018 1:06 pm

I would suggest to get with a broker and price out term insurance if you have an ACTUAL insurable need above the amount of term you already have in place. I sense some emotion and fear in the original post that may or may not be based in reality. If you do need more insurance above your term insurance that you can't cover with extra savings and investments (that you would have by not buying WL) and you truly find out you are not insurable and you actually check the cost of the WL (not some letter in the mail) then maybe I would do it.

But that is a lot of steps to go thru before ever buying WL.

Rupert
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Re: Whole Life - We're doing it. What to look for?

Post by Rupert » Mon Jul 09, 2018 1:14 pm

Nate79 wrote:
Mon Jul 09, 2018 1:06 pm
I would suggest to get with a broker and price out term insurance if you have an ACTUAL insurable need above the amount of term you already have in place. I sense some emotion and fear in the original post that may or may not be based in reality. If you do need more insurance above your term insurance that you can't cover with extra savings and investments (that you would have by not buying WL) and you truly find out you are not insurable and you actually check the cost of the WL (not some letter in the mail) then maybe I would do it.

But that is a lot of steps to go thru before ever buying WL.
This. I also sensed some emotion and fear in the initial post but was afraid to mention it. I would also like to reiterate what another prior poster said, which was to not assume your wife is uninsurable. I have a chronic condition and also will (probably) need a big-deal sorta surgery in the future (could be next year, could be 30 years from now). My medical history is now a multi-volume work. Nevertheless, I was able to buy a new 20-year term policy at the standard rate after my diagnosis.

deltaneutral83
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Re: Whole Life - We're doing it. What to look for?

Post by deltaneutral83 » Mon Jul 09, 2018 1:27 pm

Is the OP expressing regret for not getting more term 5 years ago ? I don't see the issue, the OP's spouse is insured for 25 more years? By that point, the nest egg should be built.

NotWhoYouThink
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Re: Whole Life - We're doing it. What to look for?

Post by NotWhoYouThink » Mon Jul 09, 2018 1:44 pm

I am fully aware investing the difference between our current term policy and a whole life policy is should result in a higher end amount, based upon average market returns. However, due to my SO's medical condition, which limits a future term policy, and our desire to have a guaranteed (and stress-free/immediate) payout, we are going to purchase a WL policy.
OP, maybe you can clarify your logic a bit here.

Is the concern that the $250K you have on your spouse is not enough? Maybe you could add more term.
Is the concern that the term only goes for 25 more years, and there will be no payout for a death after that point? That doesn't seem like a real problem because you have 25 years to start saving for that day. I'm there now - will be 60 soon, and every bit of our financial planning works fine with no insurance payout if either of us dies, because that's what we've been saving for.
Is the concern that the Term may not pay our immediately but the whole life would? I can't figure that out, so I assume no.

We have money in a checking account to cover the next month's expenses, income that feeds the checking account to cover expenses after that, and brokerage and retirement accounts for long term. And we have credit cards with high limits. If either of us dies tomorrow it would take at least 6 months for cash flow problems to manifiest themselves, because we've set things up that way. You can too.

edited to add: sometimes insurance doesn't pay out right away. If there is a question about cause of death and the death certificate is delayed the insurance payment will be delayed as well.

niceguy7376
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Re: Whole Life - We're doing it. What to look for?

Post by niceguy7376 » Mon Jul 09, 2018 2:08 pm

SwampDonkey wrote:
Mon Jul 09, 2018 9:50 am

DEATH BENEFIT
Base Face Amount: $100,000.00
PUAR Face Amount: $0.00
Total Death Benefit: $100,000.00

PREMIUM
Premium Mode: Monthly
Premium Type: 20 Pay
Initial Non-1035 Amount: $0.00
1035 Exchange Amount: $0.00
Modal Base Premium (excludes 1035): $76.68
Modal PUA Premium: $0.00
Modal Rider Premium: $0.00
Total First Year Premium: $920.16
I dont correctly understand whole life policies. Please do correct my understanding.
You pay for 20 years for a total death benefit of 100K? Any idea what this 100K will be 10 years down the lane? Will they refund anything after 20 years or the death benefit continues till death except that no more payments are needed after 20?

If we assume that the premium wont change for next 19 years, then you pay $18403.2 in 20 years and you have 100K death benefit for the rest of SO life?

Why do you think that this policy will pay off within a day or two of death compared to a term life policy that you already have?

JBTX
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Re: Whole Life - We're doing it. What to look for?

Post by JBTX » Mon Jul 09, 2018 7:51 pm

There may be times whole life makes sense for somebody and I don't pretend to be an expert. But keep in mind whole life is a combination of a guaranteed low rate of return investment, and payment on premature death (which is effectively or similar to term insurance). Most of the premium you pay is related to the investment. Maybe 5-10% of the premium is for the death benefit, and the rest for the cash value investment.

So if your goal is to have a death benefit, you will get a lot more death benefit for term insurance. So buy more term insurance.

Look at it this way. If diagnosed with a dangerous disease, would it make sense to run out and buy a bunch of 30 year bonds?

Boglegrappler
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Re: Whole Life - We're doing it. What to look for?

Post by Boglegrappler » Mon Jul 09, 2018 8:20 pm

The issue with whole life is that is a blended "product" that mixes an investment feature with life insurance.

I have a fairly good background in finance, was pretty good at math, and have degrees from schools that would suggest that I could understand a broad range of things. I always found it impossible to figure out what I was paying for the insurance part (and, obviously, what my investment return might turn out to be). Maybe things have changed....but I doubt it.

The issue of insurability makes things different, but I do wonder if you have to answer questions about your medical conditions (as opposed to being examined) that might render the rationale for the purchase inoperable. Not requiring an exam seems to be different than waiving a pre-existing condition.

Good luck.

delamer
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Re: Whole Life - We're doing it. What to look for?

Post by delamer » Mon Jul 09, 2018 8:42 pm

robebibb wrote:
Mon Jul 09, 2018 11:54 am
If you have a sufficient emergency fund and both spouses are kept up to speed on financial assets and liabilities I see no need for permanent insurance. If you believe your wife now has a significantly shorter life expectancy due to her diagnosis then it could be financially beneficial to purchase the WL policy but that is a separate issue.
I agree.

With respect, it is likely that the financial difficulties that your family members experienced could have been prevented (or reduced) if the widow was well informed about the family’s finances and had access to an emergency fund.

More money in life insurance would not have prevented those immediate problems.

Is there some reason that your SO needs more insurance now or that she might need more in the future? If so, then consider the WL or look into more term as others have noted.

But don’t add coverage just because a family member had a difficult time immediately after an unexpected death. The solution to that problem is an emergency fund/liquidity, not more insurance that won’t be paid out right away.

SwampDonkey
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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Mon Jul 09, 2018 11:32 pm

bloom2708 wrote:
Mon Jul 09, 2018 10:00 am
Why not buy more Term insurance instead of Whole Life?

Very sorry for the loss in the family, but don't do anything quickly in response to something bad happening.

Search on Whole or Universal Life and read threads on these topics. Most buy and then try to figure out how to get out. It is mostly junk.

You build up cash value, but the policy pays out the face value upon death. Your savings account (cash value) goes away. Fees are high and return is low.

Buy more Term insurance.
1. Buying more term will be cost-prohibitive due to the SO's recent medical diagnosis.
2. The urgency isn't born from the recent death in the family, it is a result of the SO's current term policy hitting it's 5-yr anniversary.

Thank you for your thoughts.

SwampDonkey
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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Mon Jul 09, 2018 11:35 pm

BogleMelon wrote:
Mon Jul 09, 2018 10:05 am
Whole life is a crab product. Nothing you can look for to make it a good product. It is like asking, what ingredient to look for to buy a healthy donut!
Any recommendations for insurance that include the following three things:
1. Life-long coverage.
2. Does not require a medical examination.
3. Is reasonably priced.

Thank you for your thoughts.
...and don't hate on the donuts! :happy

SwampDonkey
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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Mon Jul 09, 2018 11:46 pm

HomerJ wrote:
Mon Jul 09, 2018 10:06 am
SwampDonkey wrote:
Mon Jul 09, 2018 9:50 am
Background 1: SO is mid-30's and nearing the 5-year point on a 30-year term policy with Navy Mutual.
Having the "comfort" of a known-immediate lump-sum income would have been worth it's weight in gold for the widow and her children. Bottom Line - After seeing how the situation played out in our family, we want a smallish (100k) guaranteed payment that will greatly reduce any initial stressors and anxiety.
If your SO lives 25+ years, you won't need the money because you'll have plenty of it by then and the kids will be grown.

But if this gives you peace of mind, then go for it.
Agree. In the current situation, the recently widowed family member is financially secure. However, the suddenness of the death (and loss of that income), just added another huge layer of worry and anxiety that could have been nullified had there been any insurance coverage (even something as small as $100k). Put another way, I am nearly certain the widow and her late husband would have absolutely paid the $18k for a WL policy had they been able to see how abruptly everything came to an end and how much stress, anxiety, and worry, would be a result of not having the policy.

Thank you for your thoughts. :sharebeer
Last edited by SwampDonkey on Mon Jul 09, 2018 11:51 pm, edited 1 time in total.

SwampDonkey
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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Mon Jul 09, 2018 11:51 pm

soccerrules wrote:
Mon Jul 09, 2018 10:11 am

If you are well on your way with savings and plan to continue with tax-deferred, index investing, you may not want/need the life insurance in 25 years.

I would look into buying more term as an option as well.
SO and I are tracking for a reasonable, middle-class, retirement. We max IRAs, TSP, etc. The "need" for the $100k WL policy isn't really a need, so much as a comfort-blanket and reducer of unneeded stressors, etc. Unfortunately, additional term is cost-prohibitive due to recent diagnosis.

Thank you for your thoughts.

SwampDonkey
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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Mon Jul 09, 2018 11:55 pm

GodelianKnot wrote:
Mon Jul 09, 2018 10:18 am
Just because they don't require a new medical exam, doesn't mean they won't ask you a few questions to assess any potential health changes. (And purposefully lying about your medical condition would be insurance fraud, and would let them deny you a payout if they figured it out.) So, you might not want to depend on this "no medical exam" freebie.
Good point and this came up when I asked Navy Mutual why my SO was reduced from "Super-Select" (or whatever the highest level of health category is) to regular "Select" on the WL illustration. They said because no medical exam or further questioning is required, the policy holder is automatically lowered to the standard category of "Select" (note, the rep said it is about a $10 difference between the categories).

Thank you for your thoughts.

SwampDonkey
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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 12:00 am

navyitaly wrote:
Mon Jul 09, 2018 10:19 am
Would I do it now, NO, but since my policy is grandfathered, after expenses I'm yielding 4.5% per year now...I can't get that anywhere else with almost no risk (unless they went out of business)....but, don't expect these yields in new policies. My interest rate is 5.5% - expenses so it's like 4.5%.
Thanks for sharing your NM experience. While the 4.5% yield (or whatever it adjusts to) is nice, we aren't necessarily viewing the policy as an investment; it's more of a relatively minor financial investment which will guarantee a certain level of financial calmness when worlds are turned upside down.

Appreciate your thoughts.

SwampDonkey
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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 12:07 am

bberris wrote:
Mon Jul 09, 2018 11:27 am
There seems to be some confusion about what "non-profit" means. It does NOT mean that they sell products at cost. Non profits are allowed to retain earnings. This would be called a profit, except that the company is non-profit. They can also charge whatever the market will bear for product, and pay it out as salary.

Buying from a non-profit does not mean you are getting good value, or the lowest price. It just means the company that sold it to you will probably not pay income tax on the earnings.
Yes, I'm familiar with non-profits and charities and have had the interesting experience of reviewing 300+ tax statements for various 503Cs. The experience was jading and as a result I've completely changed how I vet who I donate resources (time, money, etc) to.

Have an opinion on the lack of commissions for their WL policies?

Thanks for your thoughts!

SwampDonkey
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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 12:11 am

Stinky wrote:
Mon Jul 09, 2018 11:28 am
Does SO really need $100k when SO is 60+ years old? Wifey and I have dropped our term insurance as we're in our 60s, with no children to support and burial taken care of. Do you expect to have insurance needs (disabled child, etc.) at age 60+ that will require insurance?

If SO really does need $100k of insurance at age 60+, then permanent insurance issued now by Navy Federal may be a good buy. You probably can't get a cheaper policy through any other source, given SO's medical condition. But you should check that out with other insurers to make sure before you buy from Navy Federal.

I note that you were quoted a 20-pay life policy. You could save some monthly premium dollars by buying true whole life, with premiums payable for the whole of life, rather than 20-pay life.
Thanks, Stinky; I wasn't aware of policies that had premiums payable for the whole of life. Since the premiums are already on the small side, we may request a new quote with a possible 10-pay or 5-pay (if those exist....) to reduce the overall payment (similar to a 15-yr mortgage, vice a 30-yr).

Thanks for your thoughts!

letsgobobby
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Re: Whole Life - We're doing it. What to look for?

Post by letsgobobby » Tue Jul 10, 2018 12:21 am

Does WL pay out faster than term? I have never heard such a thing.

SwampDonkey
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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 12:22 am

Rupert wrote:
Mon Jul 09, 2018 11:43 am

A life insurance policy will not necessarily pay out in 1-2 weeks. There was a thread here recently about someone still waiting for the check months after the death occurred. At the very least, an insurance company is going to want a death certificate before paying out. How quickly a certificate is issued will vary by jurisdiction. So a WL policy is no substitute for an appropriately-sized emergency fund that both partners have access to (and, importantly, know how to access), which can be used to keep the family afloat during the initial weeks following a death.
I incorrectly used the word "immediate." I should have said "within a couple of months."

As for the emergency fund - completely agree. In the current situation, even though the widow has sufficient liquid assets to "keep the lights on," there is still a significant amount of immediate stress that could have been easily mitigated (not only for her, but also her children who were rightfully concerned about their mother's well-being) via an insurance policy.

Once I receive her permission, I'll probably be making an additional post (and request for help) regarding her detailed financial situation.

Thanks for your thoughts!

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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 12:24 am

LarryAllen wrote:
Mon Jul 09, 2018 11:57 am


I would encourage you to check 20 year term (and whole life) rates even with medical condition as a "rated" policy may be cheaper than your convertible whole life product. The convertible term products, like you are looking to exercise, typically convert to the highest retail whole life if that makes sense. So it's not the best usually. If it's the only option then so be it but I would verify your options first.
I wasn't aware of this. Thank you!

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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 12:27 am

wd123 wrote:
Mon Jul 09, 2018 12:25 pm
I was able to get $500k/ 20 year term life insurance for about $1500/year with a congenital bicuspid aortic valve that will most likely need some sort of surgical intervention in the next 25 years (30 YO now). That plus what work provides will have to be enough.

SelectQuote is who I went through and they used Lincoln Financial Group. I rated just above "DO NOT INSURE" for a guy who does not smoke or drink and has normal BMI.
Appreciate you sharing your personal experience. Was a 20 year term the maximum they offered or is that all you requested?

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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 12:30 am

Double post.
Last edited by SwampDonkey on Tue Jul 10, 2018 12:32 am, edited 1 time in total.

SwampDonkey
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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 12:31 am

Nate79 wrote:
Mon Jul 09, 2018 1:06 pm
I would suggest to get with a broker and price out term insurance if you have an ACTUAL insurable need above the amount of term you already have in place. I sense some emotion and fear in the original post that may or may not be based in reality. If you do need more insurance above your term insurance that you can't cover with extra savings and investments (that you would have by not buying WL) and you truly find out you are not insurable and you actually check the cost of the WL (not some letter in the mail) then maybe I would do it.

But that is a lot of steps to go thru before ever buying WL.
The WL shouldn't be a financial need as we already aggressively invest in retirement accounts.

Thank you for your thoughts!

SwampDonkey
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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 12:43 am

deltaneutral83 wrote:
Mon Jul 09, 2018 1:27 pm
Is the OP expressing regret for not getting more term 5 years ago ? I don't see the issue, the OP's spouse is insured for 25 more years? By that point, the nest egg should be built.
Answer:
1. No regret.
2. Yes, SO is ensured for 25 more years.
3. Yes, we are tracking for a reasonable nest egg.

The "issue": We are currently in a situation in which close family (who are financially secure) had their world turned upside down by an unexpected loss. If a fictitious disinterested party reviewed their finances, they would (probably) also agree the widow has nothing to worry about (solid middle-class). However, as we are learning, unexpected losses lead to worries that aren't necessarily justified. A small insurance policy, while not substantial enough to save a widow from financial ruin, would still be significant enough to either eliminate or greatly reduce any unnecessary (and irrational) fears of financial health.

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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 12:51 am

NotWhoYouThink wrote:
Mon Jul 09, 2018 1:44 pm
I am fully aware investing the difference between our current term policy and a whole life policy is should result in a higher end amount, based upon average market returns. However, due to my SO's medical condition, which limits a future term policy, and our desire to have a guaranteed (and stress-free/immediate) payout, we are going to purchase a WL policy.
OP, maybe you can clarify your logic a bit here....
Is the concern that the $250K you have on your spouse is not enough?
A. No. $250k is sufficient. My response directly above this one better describes why we are purchasing a WL policy.

Is the concern that the term only goes for 25 more years, and there will be no payout for a death after that point?
A. Yes. Kind of...

Is the concern that the Term may not pay our immediately but the whole life would?
A. No. Not at all. As far as I know, term and WL's payout timelines are the same.

We have money in a checking account to cover the next month's expenses, income that feeds the checking account to cover expenses after that, and brokerage and retirement accounts for long term. And we have credit cards with high limits. If either of us dies tomorrow it would take at least 6 months for cash flow problems to manifiest themselves, because we've set things up that way. You can too.
A. Yes, we are set up similarly and "keeping the lights on" wouldn't be a problem for >6 months.

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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 12:59 am

niceguy7376 wrote:
Mon Jul 09, 2018 2:08 pm

I dont correctly understand whole life policies. Please do correct my understanding.
You pay for 20 years for a total death benefit of 100K?
A. Yes.

Any idea what this 100K will be 10 years down the lane?
A. What do you mean? It will always be 100K.

Will they refund anything after 20 years or the death benefit continues till death except that no more payments are needed after 20?
A. So long as the premiums are paid for the first 20 years, the $100k death benefit continues for the SO's entire life.


If we assume that the premium wont change for next 19 years, then you pay $18403.2 in 20 years and you have 100K death benefit for the rest of SO life?
A. That is correct.

Why do you think that this policy will pay off within a day or two of death compared to a term life policy that you already have?
A. I don't think that. I believe they will pay off approximately within the same time period.

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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 1:05 am

JBTX wrote:
Mon Jul 09, 2018 7:51 pm
There may be times whole life makes sense for somebody and I don't pretend to be an expert. But keep in mind whole life is a combination of a guaranteed low rate of return investment, and payment on premature death (which is effectively or similar to term insurance). Most of the premium you pay is related to the investment. Maybe 5-10% of the premium is for the death benefit, and the rest for the cash value investment.

So if your goal is to have a death benefit, you will get a lot more death benefit for term insurance. So buy more term insurance.

Look at it this way. If diagnosed with a dangerous disease, would it make sense to run out and buy a bunch of 30 year bonds?
Appreciate you "pie-charting" what WL premiums go towards. I've spent considerable time researching WL ever since we received the letter from Navy Mutual and I'm still not 100% certain of each WL nuance (hence, the reason for my post). However, viewing it purely as a vessel for insurance, it seems to be an okay product for someone in our situation (where additional term insurance would be cost prohibitive).

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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 1:15 am

Boglegrappler wrote:
Mon Jul 09, 2018 8:20 pm
The issue with whole life is that is a blended "product" that mixes an investment feature with life insurance.

I have a fairly good background in finance, was pretty good at math, and have degrees from schools that would suggest that I could understand a broad range of things. I always found it impossible to figure out what I was paying for the insurance part (and, obviously, what my investment return might turn out to be). Maybe things have changed....but I doubt it.

The issue of insurability makes things different, but I do wonder if you have to answer questions about your medical conditions (as opposed to being examined) that might render the rationale for the purchase inoperable. Not requiring an exam seems to be different than waiving a pre-existing condition.

Good luck.
We've verified the WL policy would be written based upon the health of my SO at the time of her initial term policy (e.g., no medical concerns at that point). However, the WL policy would be written at the "standard" level of health (e.g., an average person), vice the "superior standard" (or whatever the highest category of health is) which is what the term policy is written on.

If we were solely looking at WL for it's investment purposes, we wouldn't be purchasing it as I also don't fully understand it the investment aspect of it.

Thank you for your thoughts.

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Re: Whole Life - We're doing it. What to look for?

Post by Nate79 » Tue Jul 10, 2018 1:22 am

SwampDonkey wrote:
Tue Jul 10, 2018 1:15 am
Boglegrappler wrote:
Mon Jul 09, 2018 8:20 pm
The issue with whole life is that is a blended "product" that mixes an investment feature with life insurance.

I have a fairly good background in finance, was pretty good at math, and have degrees from schools that would suggest that I could understand a broad range of things. I always found it impossible to figure out what I was paying for the insurance part (and, obviously, what my investment return might turn out to be). Maybe things have changed....but I doubt it.

The issue of insurability makes things different, but I do wonder if you have to answer questions about your medical conditions (as opposed to being examined) that might render the rationale for the purchase inoperable. Not requiring an exam seems to be different than waiving a pre-existing condition.

Good luck.
We've verified the WL policy would be written based upon the health of my SO at the time of her initial term policy (e.g., no medical concerns at that point). However, the WL policy would be written at the "standard" level of health (e.g., an average person), vice the "superior standard" (or whatever the highest category of health is) which is what the term policy is written on.

If we were solely looking at WL for it's investment purposes, we wouldn't be purchasing it as I also don't fully understand it the investment aspect of it.

Thank you for your thoughts.
Since you are only looking at this as a life insurance product I suggest you get a quote from a broker for term insurance and compare the cost directly to the WL. While you will be paying some of the premium in the WL for cash value if the insured dies the insurance company keeps the cash value. So it's basically a waste.

SwampDonkey
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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 1:24 am

delamer wrote:
Mon Jul 09, 2018 8:42 pm
robebibb wrote:
Mon Jul 09, 2018 11:54 am
If you have a sufficient emergency fund and both spouses are kept up to speed on financial assets and liabilities I see no need for permanent insurance. If you believe your wife now has a significantly shorter life expectancy due to her diagnosis then it could be financially beneficial to purchase the WL policy but that is a separate issue.
I agree.

With respect, it is likely that the financial difficulties that your family members experienced could have been prevented (or reduced) if the widow was well informed about the family’s finances and had access to an emergency fund.

More money in life insurance would not have prevented those immediate problems.

Is there some reason that your SO needs more insurance now or that she might need more in the future? If so, then consider the WL or look into more term as others have noted.

But don’t add coverage just because a family member had a difficult time immediately after an unexpected death. The solution to that problem is an emergency fund/liquidity, not more insurance that won’t be paid out right away.
I think there is a misunderstanding....

The family member has not experienced an immediate financial difficulty. However, she (as well as her children) were/are worried about both near term and long term (10'ish years and beyond) may hold for her, financially. I am confident a small to moderate sized insurance policy would have alleviated a lot of those unneeded concerns.

Thank you for your thoughts.

SwampDonkey
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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 1:29 am

I appreciate everyone's thoughts so far but unfortunately I haven't actually received an answer to my initial question ---

Is the WL policy that we have been quoted an okay WL policy?

Should we be requesting any modifications?

Are PUAs something we should pursue or not?

Thanks again for everyone's time.

JBTX
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Re: Whole Life - We're doing it. What to look for?

Post by JBTX » Tue Jul 10, 2018 1:43 am

A term policy of 20 years for a 35 year old standard risk 100k would be about $175 per year. Your whole life is almost $1000 per year.

https://www.quickquote.com/term-life-insurance-quotes

It's Impossible to say if your quote us good because we dont know the cash value at 20 years or any other point. You are paying an additional $800 per year for the cash value. Without knowing the cash value it is impossible to estimate a rate of return.

SwampDonkey
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Re: Whole Life - We're doing it. What to look for?

Post by SwampDonkey » Tue Jul 10, 2018 1:59 am

JBTX wrote:
Tue Jul 10, 2018 1:43 am
A term policy of 20 years for a 35 year old standard risk 100k would be about $175 per year. Your whole life is almost $1000 per year.

https://www.quickquote.com/term-life-insurance-quotes

It's Impossible to say if your quote us good because we dont know the cash value at 20 years or any other point. You are paying an additional $800 per year for the cash value. Without knowing the cash value it is impossible to estimate a rate of return.
Image

Image

JBTX
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Re: Whole Life - We're doing it. What to look for?

Post by JBTX » Tue Jul 10, 2018 6:45 am

SwampDonkey wrote:
Tue Jul 10, 2018 1:59 am
JBTX wrote:
Tue Jul 10, 2018 1:43 am
A term policy of 20 years for a 35 year old standard risk 100k would be about $175 per year. Your whole life is almost $1000 per year.

https://www.quickquote.com/term-life-insurance-quotes

It's Impossible to say if your quote us good because we dont know the cash value at 20 years or any other point. You are paying an additional $800 per year for the cash value. Without knowing the cash value it is impossible to estimate a rate of return.
Image

Image

OK thanks. First I'm not an expert at this, to be clear

But based on the term quote above, for standard risk is annual premium of $175 vs $920 whole life. Basically $750 per year difference, which in theory goes towards cash value investment.

In 20 years the guaranteed cash value is $31440. Using 20 years annual pay in of $750 year, that is better than a 7% annualized rate of return, which is shockingly good for a whole life. Good enough that it makes me think I've made an error here, although I don't know what it would be.

JBTX
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Re: Whole Life - We're doing it. What to look for?

Post by JBTX » Tue Jul 10, 2018 8:10 am

I have also found it interesting that one of the major knocks against WL is the amount of principal that goes towards salesman's commissions. With Navy Mutual, they claim their salesman are commission-free and the company is a non-profit. While these are probably true statements, I suspect a fair amount of principal is still applied to a "commission-like" fee of some sort. Thoughts?
Navy mutual appears to be a non profit. Given its mission perhaps the commission statement is true. Looking at the numbers you provided, typically you'd see no cash value in the first few years and minimal cash value growth the first 10 years. One can assume that deficit is to fund commissions and other front costs. You don't see that in the numbers you gave which gives further credence to the claim that there aren't commission payouts.

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