can insurance co take cash value without consent to pay prem

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PostPosted: Fri May 29, 2009 6:29 pm   Post subject: insurance  

I was talking to my Insurance Agent. He gave me a quote. It would cost me $40.00 per month for a $25,000 Whole Life Insurance policy. Wasn't too bad of a quote, I thought.

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PostPosted: Fri May 29, 2009 8:53 pm   Post subject:   

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Whole life also costs 2-3x more than than UL...




How about further explanation? It sounds fairly nonsensical to me. I say this because a UL policy initially is going to cost almost anything that you want it to cost. The more that you pay in the beginning, the less that you will have pay into it in the future.



With a participating WL policy, if one wants a level death benefit, the out of pocket premium will decrease every year and ultimately, the cost will be negative.
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PostPosted: Fri May 29, 2009 8:56 pm   Post subject:   

Quote:
I was talking to my Insurance Agent. He gave me a quote. It would cost me $40.00 per month for a $25,000 Whole Life Insurance policy. Wasn't too bad of a quote, I thought.




I'd be more concerned with the company than the quote. I'd strongly recommend that a whole life purchase be done with a highly rated mutual insurance company.
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PostPosted: Fri May 29, 2009 11:37 pm   Post subject:   

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How about further explanation? It sounds fairly nonsensical to me. I say this because a UL policy initially is going to cost almost anything that you want it to cost. The more that you pay in the beginning, the less that you will have pay into it in the future.



With a participating WL policy, if one wants a level death benefit, the out of pocket premium will decrease every year and ultimately, the cost will be negative.




It is very easy to solve for annual premium it will take to keep the no-lapse guarantee in place on a UL, and it will usually be 2-3x the cost for the same death benefit in a whole life policy. The OOP cost on the whole life might decrease due to the dividends, but what does it cost to get there in the first place? $5k/year instead of $2k/year for the same death benefit? What if the company cuts the dividends? You can write all you want about the past dividends of carriers, but past performance has no effect on future performance, and I'd be very concerned about the future of dividends, interest rates, and COI charges from any carrier, whether it's New York Life, John Hancock, Prudential, MetLife, Mutual of Omaha, or anyone else.





SD - $480/year for $25k may or may not be a reasonable cost - what is your age and relative health? You may find out that you could get $100k of universal life or $250k of term for the same price.
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PostPosted: Sat May 30, 2009 12:41 am   Post subject:   

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It is very easy to solve for annual premium it will take to keep the no-lapse guarantee in place on a UL, and it will usually be 2-3x the cost for the same death benefit in a whole life policy. The OOP cost on the whole life might decrease due to the dividends, but what does it cost to get there in the first place? $5k/year instead of $2k/year for the same death benefit? What if the company cuts the dividends? You can write all you want about the past dividends of carriers, but past performance has no effect on future performance, and I'd be very concerned about the future of dividends, interest rates, and COI charges from any carrier, whether it's New York Life, John Hancock, Prudential, MetLife, Mutual of Omaha, or anyone else.




Excellent. Now, this is something that makes sense. You are 100% correct that the premium for a no lapse UL will often be 1/3 to 1/2 the premium of a participating WL policy.



Saying that "past performance has no effect of future performance" is not the same as saying "past performance is meaningless".



I would guarantee that dividends will be cut at some point. I would also guarantee that dividends will increase at some point. That's the nature of dividends.



The choice between WL and a no-lapse UL policy is a false choice. Let's say that somebody wants permanent coverage. They need a $500,000 death benefit. WL costs $5,000. NL UL costs $2500. They are only comfortable spending $2500. Unless they are old, they are better off with a combo WL/Term for $2500 than the NL UL.



UL needs to be priced so that if everything goes wrong, the insurance company will still be ok. The same is true with WL. The difference is that everything doesn't go wrong all of the time. That is why the big WL carriers have all gone 100+ years without missing a dividend payment. The only question is how big will the dividend be. Long term a WL policy is much more flexible than any UL policy.
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PostPosted: Sat May 30, 2009 12:59 am   Post subject:   

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The choice between WL and a no-lapse UL policy is a false choice. Let's say that somebody wants permanent coverage. They need a $500,000 death benefit. WL costs $5,000. NL UL costs $2500. They are only comfortable spending $2500. Unless they are old, they are better off with a combo WL/Term for $2500 than the NL UL.



UL needs to be priced so that if everything goes wrong, the insurance company will still be ok. The same is true with WL. The difference is that everything doesn't go wrong all of the time. That is why the big WL carriers have all gone 100+ years without missing a dividend payment. The only question is how big will the dividend be. Long term a WL policy is much more flexible than any UL policy.




I will have to disagree.....UL needs to be priced so the carrier will be ok if something goes wrong, but that is already happening and the carriers are trying to respond to those actions. Carriers are reducing guarantees (ex: guaranteed to age 90 instead of age 120), increasing premiums, increasing COI charges, decreasing interest rates credited on current policies, decreasing current and guaranteed interest rates on new policies, etc.



Can you cite an example of why someone would be better off with a whole life/term combination for $500k instead of a straight $500k no-lapse UL if they want the full $500k guaranteed forever and only have the $2500 to spend?
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PostPosted: Sat May 30, 2009 1:23 am   Post subject: insurance  

Nationwide is my Insurance company...been dealing with them for a LONG time. I gave the agent my info ( 45 years old, smoke, etc.) and the quote he gave me was about $40.00 pr month, for 'Whole' Life.

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PostPosted: Sat May 30, 2009 1:31 am   Post subject:   

You could get $50k no-lapse UL for about the same price....or $100k UL if you stop smoking.

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PostPosted: Sat May 30, 2009 2:38 am   Post subject: insurance  

...and the UL bulids Cash Value, as well?

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PostPosted: Sat May 30, 2009 3:03 am   Post subject:   

Yes, but not as much cash value as the whole life. Do you want life insurance or a second bank account with more limitations? If you want the higher death benefit, buy the UL. If you want the second, more limited bank account with a smaller death benefit, buy the whole life.

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PostPosted: Sat May 30, 2009 1:09 pm   Post subject: insurance  

I appriciate the advice...thanks. And...that's the only difference..really? Of course, I would want the higher death benefit in my policy.

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PostPosted: Sat May 30, 2009 3:09 pm   Post subject:   

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Can you cite an example of why someone would be better off with a whole life/term combination for $500k instead of a straight $500k no-lapse UL if they want the full $500k guaranteed forever and only have the $2500 to spend?




If you are looking solely at guarantees, they wouldn't want the whole life. By the same token, if we are only looking at guarantees, nobody should ever make an investment. (I'm not calling whole life an investment. It isn't.)



My point is that if a company has paid a dividend for every year for the last 100+ years, it doesn't make sense to make a decision and assume that the insurance company will instantly stop paying a dividend and never pay one again. That is exactly what is being done when one looks at the guarantees.



When making realistic assumptions, a participating whole life policy combined with term insurance does much better for a client than a guaranteed UL policy. This assumes that a client is not old. Older clients do much better with guaranteed UL policies.
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PostPosted: Sat May 30, 2009 3:11 pm   Post subject:   

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Nationwide is my Insurance company...been dealing with them for a LONG time. I gave the agent my info ( 45 years old, smoke, etc.) and the quote he gave me was about $40.00 pr month, for 'Whole' Life.




Find a new agent. That isn't meant to be critical of your agent. A Nationwide agent can't do what is best for you. He can only sell Nationwide. The odds that Nationwide is the very best policy for you is slim to none. Property and casualty companies don't do a good job with life insurance.
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PostPosted: Sat May 30, 2009 3:13 pm   Post subject:   

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Yes, but not as much cash value as the whole life. Do you want life insurance or a second bank account with more limitations? If you want the higher death benefit, buy the UL. If you want the second, more limited bank account with a smaller death benefit, buy the whole life.




There's a heck of a lot more to it than this.
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PostPosted: Sat May 30, 2009 3:16 pm   Post subject:   

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I appriciate the advice...thanks. And...that's the only difference..really? Of course, I would want the higher death benefit in my policy.




There's lots of differences. For instance when you get older and if your finances get tight, with a guaranteed Universal Life policy, it will probably lapse if you can't make out of pocket premium payments. With a good participating whole life policy, you should be able to still keep your policy in force.
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