by Guest » Mon Sep 20, 2010 11:43 pm
Please tell me if you think this is a good investment. I am considering purchasing a policy through Northwestern Mutual as a retirement supplement for me (if I need it) and for retirement for my 19 year old son. My son will be the insured, I will own the policy and be beneficiary. I will insure my son for 1.5 million and pay a total of $286,570 over the course of 20 years. The 20 year cash value will be $532,976 and if all goes well I won't need any of it. When my son is 69 the cash value will be $3,150,254, life insurance will be $5,314,080 and the premium outlay will have been $387,303. Please tell me if you think this would be a sound investment for my son's future.
Also, will this increase the value of my estate if I die and am still the policy owner? I plan on transferring it to him in around the 20 year mark. Thanks for your help. It looks like it could be a great thing to do for my son but I'm on the fence. Any advice is appreciated
Also, will this increase the value of my estate if I die and am still the policy owner? I plan on transferring it to him in around the 20 year mark. Thanks for your help. It looks like it could be a great thing to do for my son but I'm on the fence. Any advice is appreciated
Posted: Tue Sep 21, 2010 04:22 am Post Subject:
Until, then, what explains the huge increase in death benefit if dividends are paying premiums and not purchasing paid up additions?
For instance, maybe premiums are being paid out of pocket for the first 26 years and then dividends are paying them thereafter.
NML is certainly a very good company. My impression is that this would be a very small policy for them for UL.
Like you, I could be wrong and wouldn't mind losing the bet, but I doubt it in this case. If we were talking about virtually any other company, I wouldn't be so sure of myself.
Posted: Tue Sep 21, 2010 03:19 pm Post Subject:
My impression is that this would be a very small policy for them for UL.
? ? ?
For instance, maybe premiums are being paid out of pocket for the first 26 years and then dividends are paying them thereafter.
That's what I questioned to begin with. If it's a whole life policy, the dividends could eventually be large enough to pay the premiums in whole or in part. But I doubt they would be large enough to both pay premiums AND purchase paid up additions in the amount claimed. The OP states that he is still paying premiums in the later 30 years, and if that's true, then the dividends can't be purchasing paid up additions.
Enough dividends in the first 20 years to improve a WL policy from $1.5 to $5.3 million at age 69? I think that would be a real stretch, to say the least. We are talking about age 19 issue, so obviously cost of insurance in the early years is favorable in that regard. But still suspect in my mind.
Illustrating a $1.5 million WL policy in a way that shows it growing to $3.15 million in cash value in 50 years is just plain WRONG -- too many variables when it comes to insurer profitability to be able to make that statement with any kind of certainty. But read the words the OP uses to describe the scenario. He believes this IS the way the policy WILL work. You cannot illustrate WL in a way that guarantees it will do that.
But you can illustrate UL/Option II in a way that it might be possible. Notice in his second post he talks about a 5.5% ROR (about the same as I conjectured in my original reply) -- what WL policy ever discusses ROR? It's all built into the contract, but unstated. There is too much going on here to be WL -- but if it is WL that's the subject, then there are some real problems in my mind.
In my opinion, if that's what's gone on here, it would be worthy of a misrepresentation investigation by the Dept of Insurance. You must agree, it is way over the top.
Posted: Thu Sep 23, 2010 02:20 am Post Subject:
As for NML and UL, the agency I last worked for as a policy and benefits analyst (before deciding to go back to the sales side as an independent) specialized in nonqualified executive benefit deferred compensation plans. Although NML was not the main carrier we used, we had a lot of NML UL policies in force with very large face amounts. Kept me busy requesting in force illustrations in order to complete my analytical workups.
Please explain. How did you do this if you weren't an NML agent?
Posted: Thu Sep 23, 2010 02:26 am Post Subject:
? ? ?
NML tends to only write UL on giant cases. There is nothing big about $1,500,000 of coverage.
Illustrating a $1.5 million WL policy in a way that shows it growing to $3.15 million in cash value in 50 years is just plain WRONG -- too many variables when it comes to insurer profitability to be able to make that statement with any kind of certainty. But read the words the OP uses to describe the scenario. He believes this IS the way the policy WILL work. You cannot illustrate WL in a way that guarantees it will do that
I'm not sure what is wrong with this. It's probably using the current dividend scale which is the lowest that it's probably been in over 20 years. The illustration will also show the guarantees and something halfway between what is guaranteed and current. The only problem is that you are correct that the OP is describing it like this is exactly what will happen. We have no reason to assume that this is how the agent explained it.
Posted: Thu Sep 23, 2010 02:31 am Post Subject:
Notice in his second post he talks about a 5.5% ROR (about the same as I conjectured in my original reply) -- what WL policy ever discusses ROR? It's all built into the contract, but unstated. There is too much going on here to be WL -- but if it is WL that's the subject, then there are some real problems in my mind.
I guarantee that NML has a page on their illustration software that shows the rate of return on their cash value at all ages and one with it for the death benefit at every age.
In my opinion, if that's what's gone on here, it would be worthy of a misrepresentation investigation by the Dept of Insurance. You must agree, it is way over the top.
You could be correct, but knowing NML and knowing that consumers don't know what they are talking about and having no follow up posts, I think that it's more likely that we simply aren't getting the full picture.
My money is still on WL. Not only that, but I'd lay 10-1 odds.
Posted: Thu Sep 23, 2010 08:33 pm Post Subject:
Well . . . I guess we'll have to see if the OP ever returns to the discussion.
Posted: Fri Sep 24, 2010 01:59 am Post Subject:
There's nothing wrong with NML illustrating large growth in cash surrender values in the future. WL can be a great way to accumulate assets, and it's a lot more secure (from a product design standpoint) than UL.
What the OP is talking about (who doesn't appear to have returned to check responses in the past several days) is a typical strategy talked about by captive agents for the big mutuals.
It's not a bad strategy--though I don't know if NML would be the company I'd choose for this strategy, there are better options for this.
but...
The comments about difficulty insuring the kid for that amount are true. Depending on the state, or company practice, there's going to need to be sizable death benefit in force on the parent.
The sole beneficiary of the estate bit doesn't make any sense, and I have a hard time figuring out why the agent would have even mentioned that.
There are a lot of technical issues here, but it's not a bad suggestion.
Posted: Fri Sep 24, 2010 10:31 pm Post Subject:
WL can be a great way to accumulate assets, and it's a lot more secure (from a product design standpoint) than UL.
Agreed.
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