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Biglawyers: Did you fall for the whole life insurance scam?
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Date: January 15th, 2015 12:16 PM Author: Exciting Transparent Property Was pitched on this last week. Nearly committed to do it after an hour and a half long sales pitch.
Luckily did my own research after the pitch. I consider myself pretty savy financially and can't come to any other conclusion after running numbers other than that this is a scam preying on the risk aversion of biglawyers. Was curious if others have done this or if I am off base. |
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Date: January 15th, 2015 12:54 PM Author: Elite orchestra pit Some form of life insurance seems credited if you have young kids. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122380) |
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Date: January 16th, 2015 3:20 PM Author: Ivory tattoo cuckold This. I have one baby dood already and another on the way. Being in my early 30s and the breadwinner for the family, I'm looking to add another million to my current one million dollar policy. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27129053) |
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Date: January 15th, 2015 8:05 PM Author: Passionate locale pozpig I assume you're talking about "whole" life insurance. Term life insurance is not really a scam, and is worth it if you have dependents. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27124670) |
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Date: January 15th, 2015 10:11 PM Author: Adventurous Zombie-like Spot Ape He literally put "whole life insurance" in the title of the thread (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27125486) |
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Date: January 16th, 2015 1:23 PM Author: Passionate locale pozpig Yeah, I just re-read that. I originally read it in the colloquial sense of "the whole multi-level marketing scam" or "the whole pay-by-weight" scam. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27128349) |
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Date: January 16th, 2015 3:19 PM Author: Ivory tattoo cuckold Did the same thing. Honest mistake. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27129048) |
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Date: January 21st, 2015 7:05 PM Author: arousing site liquid oxygen Ditto (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27160198) |
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Date: February 16th, 2015 1:42 PM Author: Irradiated Bat-shit-crazy Headpube ditto (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27326584) |
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Date: February 16th, 2015 1:44 PM Author: razzmatazz parlour lol (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27326600) |
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Date: February 21st, 2015 6:14 PM Author: bright deer antler striped hyena he was talking about whole life insurance
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Date: January 15th, 2015 12:23 PM Author: salmon center I have life insurance. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122253) |
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Date: January 15th, 2015 12:27 PM Author: Violet pervert Some idiot at my old firm fell for this. He actually was "investing" in a whole life policy with his sister as the beneficiary instead of using his 401K. In truth, firms should not allow those guys in the door. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122267) |
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Date: January 15th, 2015 1:00 PM Author: Soul-stirring Hateful Stage Dog Poop I got this pitch when I was a first year, too. They must have some lackey scour the firm bios for first years every November. What a weird, oddly-focused scam. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122400) |
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Date: January 15th, 2015 1:02 PM Author: Violet pervert They are going after people who now have money and aren't used to handling it. The policies are structured so that basically the whole first year's payments go towards commission for the salesman. So, they effectively lock you in so that you can't get out once you realize you've been scammed. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122408) |
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Date: January 15th, 2015 1:11 PM Author: Soul-stirring Hateful Stage Dog Poop Yeah, and obviously it works. Looking back, their pitch was amusingly devious- "oh, you want to set up a meeting in one of our conference rooms? I guess this is what I do now, set up meetings with my financial advisors, because I'm a big shot and too busy to handle all this money I'm making! Sure, they won't make very much with my investment now, but when I get BREAKFAST we'll have a relationship and I'll trust them!" Later, "uh, you want me to buy life insurance on monthly installments nearly as high as my student loans?" (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122442) |
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Date: January 15th, 2015 1:17 PM Author: Violet pervert I doubt if they trick more than 1 in 20 associates, but it's still worth it because they basically have those 1 in 20 associates paying for life. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122475) |
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Date: February 21st, 2015 5:44 PM Author: Doobsian keepsake machete church actually whole life doesn't want you to pay for life, they want you to cancel in the first 20 years because the premiums are too expensive (whole term insurance becomes a good investment and amortizes the transaction costs around yr 20) which of course means associates are the perfect target, because they get it, pay a shitload, then stop paying their premiums after they get shitcanned, and the insurance co gets to pocket all that money and never pay it out |
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Date: January 15th, 2015 1:37 PM Author: razzle-dazzle high-end haunted graveyard we would have a guy infiltrate the entire first year class every year, then inevitably someone would fall for it, become linkedin friends, and then everyone in the office would just get spammed ruthlessly.
then it moved to the GFs/spouses and got completely ridiculous |
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Date: January 15th, 2015 3:24 PM Author: chestnut stead gunner happened to our class last year
so gd annoying |
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Date: May 9th, 2016 2:07 AM Author: Talented ungodly market hominid is this real or flame? lol lawyers (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#30438219) |
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Date: January 15th, 2015 8:06 PM Author: Passionate locale pozpig instead? I could see it conceivably not being a terrible investment if you've already maxed out other tax-favored options. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27124673) |
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Date: January 15th, 2015 8:18 PM Author: swollen trust fund abode In certain situations, like the one you've described, whole life insurance can be a good long-term bond substitute/high-interest money market account. I will probably get a small whole life policy for that purpose.
The problem is that the version of whole life that is pitched to biglaw associates is generally crappy, and the difference between the crappy version that they pitch, and an optimal policy, can be millions of dollars decades later. |
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Date: January 15th, 2015 8:44 PM Author: trip lodge brethren LOL
[reminds self to never to consult ultra-sophisticated counselor at law IronMonkey] |
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Date: January 16th, 2015 1:28 PM Author: Passionate locale pozpig What? You think whole life insurance is always a terrible investment for all people in all situations? (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27128370) |
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Date: February 21st, 2015 5:46 PM Author: Doobsian keepsake machete church you're retarded, whole term is good for certain circumstances, and he correctly identified one of them as being when you've maxed out your other tax-preferred options (because whole term is tax free, even the dividends it makes if it's participatory). Think of it as a bond or money market acct (as someone else above correctly identified) (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27364262) |
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Date: January 21st, 2015 6:40 PM Author: Dashing address I got this pitch as well. The insurance guy I met was sent over by a senior associate. When I had my first mtg with the guy, he asked me to name three new attys at my firm so that he can meet them. I guess this is how he got some of the leads. I was about to invest until I didn't understand how I would benefit from it. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27160113) |
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Date: January 21st, 2015 6:44 PM Author: azure stimulating dopamine ceo I went to one of these pitches once when I had nothing pressing to do and the agent was very aggressive about trying to make me name other people. The associates who give out names are the real criminals in this enterprise. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27160134) |
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Date: January 21st, 2015 7:11 PM Author: Dashing address These fuckers are horrible. I was about to commit to a whole life insurance plan, but I backed out. The dude kept on calling me every day. He wanted me to put an absurd amount of money into the plan (I had zero debt), and I was like "Fuck no." He backpedaled: "You're right. It is a lil too aggressive, but we will get to that amount together. Let's do half of that." (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27160231) |
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Date: January 15th, 2015 1:17 PM Author: razzle-dazzle high-end haunted graveyard term life is fine and i actually valued their input on that front, but their constant attempts to convert you to whole life were pretty transparent (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122474) |
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Date: January 15th, 2015 1:20 PM Author: gay old irish cottage rigpig whole life is pure fraud + lies.
single = no need for life insurance.
married = term policy
married + mortgage = larger term policy
married + kids = largest term policy (or additional term policy) |
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Date: January 15th, 2015 1:34 PM Author: Galvanic Set Chad TITCR (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122562) |
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Date: January 15th, 2015 2:07 PM Author: thirsty temple double fault What makes whole life so bad?
As an actuarial matter, it doesn't seem like one should end up being more scammy than the other. |
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Date: January 15th, 2015 2:15 PM Author: swollen trust fund abode as a concept, whole life is fine.
in practice, whole life is highly loaded, i.e. lots of sales commission.
if whole life were NOT highly loaded, it would be a decent long-term bond substitute because it's a tax shelter. it's possible to design such a lower-load whole life policy by incrementally purchasing low-load additions to a policy, but that's never the way that it's presented to biglaw associates. |
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Date: January 15th, 2015 4:09 PM Author: Pearl dysfunction (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27123404) |
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Date: January 15th, 2015 8:40 PM Author: gay old irish cottage rigpig yeah, it's the opacity and the way it's actually designed 99% or more of the time. they fuck you hard on the fees. insurance salesmen are not there to be your friend. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27124846) |
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Date: January 15th, 2015 8:47 PM Author: swollen trust fund abode It's too bad because the premise behind whole life is actually pretty elegant, and I actually like it when it's designed to maximize cash accrual.
Makes me wonder if whole life mutuals operate like credit companies -- screwing over a large set of people and subsidizing the use of credit cards for consumers who are never late on payments
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Date: January 16th, 2015 1:14 PM Author: gay old irish cottage rigpig i know that there can be a place for whole life, i've just rarely seen it. maybe after i stack a little more cheddar and/or form babby i'll go looking for the 1 in a hundred inurancebro who isn't looking to rip me off. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27128314) |
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Date: January 16th, 2015 1:51 PM Author: Abusive cobalt becky menage (Not a PCI expert, likely shitlib retard) (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27128530) |
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Date: January 15th, 2015 4:08 PM Author: Pearl dysfunction even this is generous. it applies if, and only if, 1. (married) married with debt your spouse can't handle if you die. 2. (married + mortgage) married with mortgage your spouse can't afford while she sells the house and downsizes. term life if you have kids and haven't built up enough family wealth for spouse to do well. that one makes sense. however, if you are married to a hot, they end up getting remarried pretty easily, even with kids |
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Date: January 15th, 2015 8:42 PM Author: gay old irish cottage rigpig that seems a little miserly toward dat wife breh. term is cheap as balls if you're under 40 and in decent health. no reason not to carry at least half a mil. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27124858) |
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Date: January 16th, 2015 1:07 PM Author: Pearl dysfunction with no kids, why leave one of you hitting the jackpot if the other dies? yes, it's insurance. yes, it's not that much in the big picture. but, the net present value of your contributions is less than what you get for it. that's why insurance companies have such nice buildings and their salesman make as much or more than attorneys. it's like the lottery for the well off. |
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Date: January 16th, 2015 1:13 PM Author: gay old irish cottage rigpig i'm an early-mid 30's bro with half a mil 20 year level term for under $25/month. it literally costs almost nothing. try as i might, i cannot even recognize the opportunity cost of $300/year. it's not a fucking jackpot for a reasonably successful family but it makes me pleased to think that there would be a modest windfall if i get hit by a bus. the extremely low price of my premiums is much lower, to me, than the benefit. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27128307) |
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Date: January 23rd, 2015 6:30 PM Author: chartreuse confused crackhouse This is what I did... (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27173412) |
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Date: February 21st, 2015 5:47 PM Author: Doobsian keepsake machete church whole term can be good for tax purposes if you're already maxing out ira, 401k etc, because it is a tax preferred vehicle (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27364266) |
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Date: January 15th, 2015 1:20 PM Author: Sapphire Partner Trailer Park I just click the button that gives me term life insurance up to my salary + like $500k if accidental death.. Seemed like enough (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122490) |
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Date: January 15th, 2015 1:23 PM Author: Alcoholic Dark Multi-billionaire When I was a first year, another first year chick was truly horrible with money. Went out and spent like 4K on a custom couch, and locked herself into an expensive apartment.
Sure enough, like 4 months in, she proudly told everyone that she was getting blood drawn and having a physical done for a life insurance policy she was purchasing "as an investment". Not sure if she went through with it, but she probably did. |
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Date: January 15th, 2015 1:30 PM Author: Exciting Transparent Property Op here, want to clarify that I am a single 26 year old male. I told the guy I didn't care about the death benefit and he still said it was worthwhile as a cash investment tax shelter vehicle. LJL (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122534) |
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Date: January 15th, 2015 1:33 PM Author: Violet pervert The only tax shelter you get is to protect part of your estate from taxes for your heirs. Which is not at all relevant for any biglaw associate. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122554) |
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Date: January 15th, 2015 1:35 PM Author: frozen mood locus well, to be fair, that presumes similar exemption levels.
you could easily foresee much lower exemption levels 50 years in the future, and it's not unrealistic to imagine a lot of biglaw associates having estates on the order of $3-10m |
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Date: January 15th, 2015 1:38 PM Author: Violet pervert (insurance salesman) (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122588) |
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Date: January 16th, 2015 12:58 PM Author: stubborn business firm So are you ready to sign up? (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27128198) |
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Date: January 15th, 2015 1:39 PM Author: Fishy Lascivious Prole Its only a estate tax shelter if the policy on your life is owned through the trust and you give up some ability to control the policy and its proceeds. Otherwise the death benefit is taxable. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122591) |
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Date: January 15th, 2015 1:49 PM Author: Charcoal goal in life halford Whole policies also made sense for owners and executives when purchased via a split-dollar arrangement as a means for reducing current income tax liability, but it is my understanding the IRS has cracked down on this arrangement. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122640) |
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Date: January 15th, 2015 2:27 PM Author: swollen trust fund abode the cash value/dividends are tax-deferred
the biggest problem is how to get cash in there in the first place without being ripped off |
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Date: January 15th, 2015 1:41 PM Author: Soul-stirring Hateful Stage Dog Poop To be clear, whole life isn't a scam on the level of a pyramid scheme necessarily, but they way it's sold to first years basically is. You need to be in it for a long time to get value out of it, not scrimping for a few years before you get the talk. Just max your 401k and pay off loans. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122603) |
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Date: January 15th, 2015 1:42 PM Author: Exciting Transparent Property I already have done both of those and still think I'm better just buying vanguard admiral shares. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122608) |
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Date: January 15th, 2015 2:30 PM Author: swollen trust fund abode if u have already maxed 401K, have a backdoor Roth IRA, and otherwise exhausted ur tax shelter options, AND u want some kind of long-term bond holding + u want life insurance, then a good policy is not a bad idea (u won't find one from the agents visiting ur biglaw office, tho).
if u were going to invest ur money in equities/high-risk/high-yield instruments, then it's pointless since the insurance is only intended for slow and steady growth |
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Date: January 15th, 2015 1:45 PM Author: Violet pervert A big part of the scam is the level of obfuscation involved with projected investment returns. There is nothing to stop them from giving you shit returns even if the markets do well, and no way to challenge the returns since nobody knows how they are derived. They show you all these charts with low guaranteed minimum returns and then much higher "projected" returns. You can be sure your returns will look much more like the minimum returns, no matter what. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122627) |
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Date: January 16th, 2015 1:12 AM Author: swollen trust fund abode Projected returns are a bit sketchy, but largely track the bond markets and prior years' dividends. From a bird's eye perspective, this is why I prefer mutuals, since they distribute their profits to policyholders rather than stockholders. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27126528) |
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Date: January 16th, 2015 1:32 PM Author: Passionate locale pozpig This was one of the biggest red flags for me when my insurance "bro" tried to pitch me. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27128395) |
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Date: January 15th, 2015 9:01 PM Author: bright deer antler striped hyena If you're rich as fuck, maybe. Whole life is flame for all but the richest. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27125016) |
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Date: January 15th, 2015 1:36 PM Author: Floppy nubile parlor milk (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122576) |
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Date: January 15th, 2015 1:56 PM Author: lavender vigorous corn cake corner i don't know know what you guys are being offered but if it is a "dividend" type policy or something by Northwestern mutual, i think that is probably not the best.
but the concept of investing tax free inside an insurance wrapper is a sophisticated tax avoidance scheme used by the wealthy:
http://www.nytimes.com/2011/02/10/business/10PRIVATE.html |
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Date: January 15th, 2015 2:12 PM Author: swollen trust fund abode whole life insurance is pitched by many agents, typically from northwestern mutual and metlife, to biglaw associates. these agents represent themselves as "financial advisors" rather than insurance salesmen, and arrange meetings with you to "review your financial situation."
after you sit down with them, they pitch a whole life insurance policy to you that is typically designed to maximize their commissions rather than actually help you. for example, i am looking at a policy illustration generated by a northwestern mutual agent for a proposed policy paying in about 16K per year. this policy doesn't even break even until year 14 (!) and the internal rate of return is barely 3% even at year 20 (!) |
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Date: January 15th, 2015 3:26 PM Author: chestnut stead gunner this is exactly what i was subjected to and that is exactly who it was
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Date: January 15th, 2015 3:28 PM Author: swollen trust fund abode it is completely absurd and we would be better served by a CLE explaining this stuff instead of learning about riparian rights (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27123191) |
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Date: January 15th, 2015 3:29 PM Author: chestnut stead gunner cr (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27123193) |
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Date: January 16th, 2015 1:26 AM Author: angry national (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27126574) |
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Date: January 15th, 2015 2:02 PM Author: swollen trust fund abode a good whole life policy should be blended and accrue around 75% cash value within the first year, and break even before year 5
of course, insurance salesmen rarely (never?) pitch such policies to us, because they would rather pocket the cash value and write you a policy that accrues no cash value within the first year, and breaks even after 10 years |
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Date: January 15th, 2015 2:18 PM Author: Mewling Zippy Gay Wizard Hunting Ground Came very close to falling for a pitch. "hey, I'll be in your office meeting with a few partners next week, want to set up a meeting while I am there? I can walk you through how some more senior folks at your firm have handle this important investment in the past." (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122803) |
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Date: January 15th, 2015 2:20 PM Author: swollen trust fund abode it's sometimes worth meeting these guys, not to pay attention to the product, but to pick up on tips on how to make sales pitches bc they're geniuses at it (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122814) |
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Date: January 15th, 2015 2:37 PM Author: Violet pervert Cr they have answers for everything (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122929) |
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Date: January 15th, 2015 3:17 PM Author: Exciting Transparent Property I invited the guy back just to confront him with the facts. These people are fucking magicians at making this shit seem like a great idea. I plan to continue debating him til he admits he is trying to scam me. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27123127) |
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Date: January 15th, 2015 3:26 PM Author: swollen trust fund abode ask him if it's possible to blend the policy with a 1:999 whole-to-term ratio (or at the very least, a 1:4 ratio), and use as many paid-up additions as possible to accrue as much cash value as possible. that will greatly reduce the fees (and unfortunately for ur agent, his commission), while maximizing the cash value/dividends of ur policy.
also, there is a huge variation in returns between the insurance carriers. a good carrier should be able to return around 4% IRR (pre-tax, not post-tax equivalent) after 10 years into the policy. and there should be a great deal of flexibility w/the policy as to whether you have to pay premiums every year or if you can choose not to do so without penalty. |
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Date: January 15th, 2015 10:14 PM Author: fighting range wrinkle Are you some sort of math bro? Have you looked at the VUL's that limit upside but cap downside at 0? Those seem like a great idea to me and for someone as conservative as me, would get a good portion of my cash allocation to equity exposure. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27125506) |
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Date: January 15th, 2015 11:01 PM Author: Cerebral queen of the night Without doing any math, I can tell you that your intuition isn't better at derivatives pricing than the actuaries and investment managers at the insurance company. If they are selling you downside protection, they are clipping a fee that has a profit margin.
For instance, you might think that you would be fine capping your upside at 5 percent. But you actually need the 20 percent year to make up for the 0 and 2 percent years and average out to long term equity returns, and you are paying the insurance company 15 percent of principal in the up year to feel clever when the market is down 5 percent some other year and you are flat. Obviously it's more complicated in reality, but I assure you that the insurance company has run the numbers. You will do better at Vanguard unless you have very high wealth, income and negotiating ability (and even there you are not profiting at the expense of the insurance company, but at the expense of our terrible tax law and cutting back the insurer's margins).
If you are really conservative in this market, your expected real returns are zero or negative. You can't afford to pay fat fees out of those returns because you feel like your mental math can outperform the work of a company that literally has no business other than writing negative EV contracts for you. |
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Date: January 15th, 2015 11:22 PM Author: fighting range wrinkle How do you feel about just plain vanilla 10 pay whole life with a mutual company? (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27125983) |
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Date: January 16th, 2015 12:34 AM Author: Cerebral queen of the night what are you trying to get out of it? Why do you want money to be paid on your death even if it is 50 years from now? why not term and low cost investments instead? (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27126377) |
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Date: January 16th, 2015 8:52 AM Author: fighting range wrinkle Safe conservative return, off my taxable balance sheet.
I don't believe in the equity markets over the long term. |
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Date: January 16th, 2015 1:06 AM Author: swollen trust fund abode MassMutual has a decent 10-pay product, but someone pretty credible (I think James Hunt) has commented that it's still a high-load product, when compared to a blended product.
I am considering going for a blended policy from Penn Mutual that effectively emulates a 10-pay in that it is paid up in 10 years but I can keep on adding premiums after that if I want. |
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Date: January 16th, 2015 8:54 AM Author: fighting range wrinkle Mass also has that. Every product will be high load, no way around that. If you make sure you can afford the premium and don't surrender the policy, it's fine. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27127246) |
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Date: February 16th, 2015 11:44 AM Author: swollen trust fund abode While there is some truth to the pricing critique, I think it is not as bad as one might expect if (1) the company is a mutual and is obligated to distribute its surplus or profit margins to policyholders anyway; and (2) economies of scale in purchasing options + tax deferral means that the insurance company can do this more efficiently than you can yourself.
In my view one of the problems with IULs is more that you're taking on a more risk then with straight whole life for a little more yield. Although this is true of virtually all straight universal life policies, most of those policies are based on fixed income so that it's safe to assume that the cash value will accrue fast enough to offset the increases in costs of insurance as you get older. However, with IUL, if there is a string of years where the market is down, even though you may not lose money directly, you will still have low/zero increase in cash value while the cost of insurance increases. So, you could lose money that way. This is particularly true if you take out policy loans, meaning that you'll be hit with a large negative spread between the interest rate fixed by the insurance company, plus the cost of insurance increase. (Of course, you could argue that if the market increases, you can gain a lot by taking out a policy loan, investing the loan proceeds in equities, and then obtaining a positive spread between the loan interest rate and teh cash value, plus gains in equities outside the policy).
Another risk is that the insurance company typically has the contractual right to change the caps on yield and the guaranteed floor. IIRC that has happened with a few IUL insurers.
All in all it is not too bad, not as dangerous as VUL but not as safe as straight whole life or UL. I would think that the yields would be slightly better then whole life over a long term but it may not be better as a liquidity reservoir due to lack of guarantees.
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Date: February 16th, 2015 1:21 PM Author: fighting range wrinkle What are your thoughts of getting long term care policies for my parents (either as a rider to a whole life or stand alone). (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27326484) |
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Date: February 16th, 2015 6:34 PM Author: swollen trust fund abode Unfortunately, I've never looked into LTC issues (silly, as LTC is probably one of the most important things out there). I've heard that some people use gUL w/LTC riders for this purpose. Don't know how it works out cost-wise, though. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27328708) |
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Date: February 16th, 2015 9:40 PM Author: fighting range wrinkle Mass seems to have a good product on this too.
I am thinking of getting it for my parents to hedge my inheritance |
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Date: January 16th, 2015 12:39 AM Author: swollen trust fund abode Not a math bro, just am interested in life insurance because I am a conservative investor like you.
The VULs/IULs are interesting, but one thing to watch out for is whether the VUL/IUL distributes and reinvests stock dividends. I've heard that at least some insurance companies will not distribute the stock dividends, which would be a significant hit in yield. |
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Date: January 16th, 2015 8:55 AM Author: fighting range wrinkle None that I have seen give the dividends. The concept that they can hedge better than me and give me some crumbs seems to make sense. My alternative to it isn't buying SPY, it's being in cash. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27127253) |
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Date: January 15th, 2015 2:20 PM Author: black sexy bbw Term is still a good bet if you have kids / good hedge (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27122812) |
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Date: January 15th, 2015 2:43 PM Author: swollen trust fund abode So this is the way that a good blended whole life policy should behave (of course, dividends/returns are going to be much lower now due to current low interest rates). If ur "financial advisor" pitches u something substantially different, then u know that something's up.
Year Premium Total_Prem Dividend Cash Value 1992 8,951 8,951 9.25% 8,688 1993 8,951 17,902 9.25% 18,173 1994 8,951 26,853 8.50% 28,338 1995 8,951 35,804 8.50% 39,351 1996 8,951 44,755 8.50% 51,286 1997 8,951 53,706 8.50% 64,213 1998 8,951 62,657 8.80% 78,423 1999 8,951 71,608 8.80% 93,872 2000 8,951 80,559 8.80% 110,662 2001 8,951 89,510 8.80% 128,933 2002 8,951 98,461 8.60% 148,525 2003 8,951 107,412 8.20% 169,159 2004 8,951 116,363 7.70% 190,584 2005 8,951 125,314 7.50% 213,237 2006 8,951 134,265 7.50% 237,553 2007 8,951 143,216 7.50% 263,645 2008 8,951 152,167 7.50% 291,632 2009 8,951 161,118 6.50% 318,661 |
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Date: January 15th, 2015 3:37 PM Author: Violet pervert I feel a little bad for the biglaw bros that commit to this shit and then get axed. They've either gotta forfeit the thing and take a big loss, or somehow keep making payments from who knows what? (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27123243) |
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Date: January 15th, 2015 3:42 PM Author: swollen trust fund abode yeah, part of the problem is that the model is generally unsuitable for the typical biglaw associate's trajectory of moving to a lower-paying job in a few years.
if u do go with a policy, insist on a policy optimized for early cash accrual that is (1) paid up within a decade, preferably with the option to continue premium payments in the future at ur sole discretion (2) has a broad range of premium payment minimums/maximums so u can effectively suspend payments if u need to; (3) little or no surrender fees in the event ur policy lapses); and (4) is blended, so that u break even early on and won't lose much/anything if u have to surrender the policy early on. |
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Date: January 15th, 2015 3:50 PM Author: blathering wine internal respiration principal's office when you're truly wealthy you get one of these:
http://wealthmanagement.com/insurance/tax-efficient-investing-through-private-placement-annuity-and-life-insurance-investment-ac |
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Date: January 15th, 2015 4:16 PM Author: Ultramarine excitant puppy LOL, I'd like to get a job selling this shit to people. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27123433) |
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Date: January 15th, 2015 7:45 PM Author: Mind-boggling dun codepig weed whacker It surprises me that any biglawyers would be sufficiently gullible and have enough free time on their hands to even agree to meet up with these "investment advisors." Lawyers are generally pretty skeptical and cynical folks. I have never stayed on the phone for more than 30 seconds with these guys, but every time it's been abundantly clear that they were angling to pitch a wildly inappropriate high commission insurance product. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27124553) |
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Date: January 15th, 2015 7:59 PM Author: swollen trust fund abode The lack of free time is what lures biglawyers in, though. Most biglawyers don't really think about financial management beyond paying down student loans because they don't want to think about yet another administrative item.
And biglawyers are very risk adverse. When you dangle the prospect of a conservative, purportedly high-interest, tax-deferred savings vehicle, it's quite appealing. |
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Date: February 17th, 2015 1:59 PM Author: magical knife newt A long, long time ago, when I was a junior associate, one of these guys show up under the guise of a financial adviser. I grew up poor so I took his meeting thinking maybe he can help me out a bit.
He shows up and quickly goes off on these stupid fucking tangents about whole life. I didn't even know where to begin in asking him questions. Anyway, I ask him what his commissions were. He said something like, "I'll be honest with you. I do get a commission. But it's only fair that a man gets paid for his work, am I right? Anyway, let's talk about your potential upside here." I responded like, "Well, I'm paying your commission one or or another, right, and I don't care if you get paid; I just want to know how much it costs me."
I kept on asking him about his commission, and kept on dodging, and then I said, "Well, I don't think we can do business" and showed him the door. He was acting like I was an asshole for asking how much he made. |
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Date: January 15th, 2015 8:13 PM Author: Silver nibblets affirmative action If I go before my gov student loans are paid off, is my wife or dad or anyone responsible for them? (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27124694) |
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Date: January 15th, 2015 8:37 PM Author: gay old irish cottage rigpig did they co-sign? pretty sure if you kick the bucket fed loans are forgiven. not necessarily so for private loans (there have been horror stories in the news about this lately) (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27124822) |
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Date: January 15th, 2015 9:00 PM Author: Silver nibblets affirmative action I don't think they co-signed, but I do remember having to provide information for two additional people.. I put down my dad and my uncle but it was like 2 lines and I don't remember them signing anything.
anyone remember what I'm talking about? the gov loans don't need a cosginer, right? |
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Date: January 16th, 2015 3:16 AM Author: green bossy state jewess yes they do dna tests of all your blood relatives and throw them in debtors prison one by one till someone pays off your gradplus loans (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27126823) |
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Date: January 15th, 2015 8:20 PM Author: marvelous fat ankles Did u see the 60 minutes story where they talked about how employers make money off employee life insurance policies? It's a scam. Big corps make tens of millions when their employees die. They get part of the proceeds. Thats why a lot of big corps evne offer it cause half goes to the employee's beneficiary, the other have goes to the corp. America never not scamming the little guy. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27124721) |
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Date: January 15th, 2015 8:39 PM Author: gay old irish cottage rigpig you sure that's not because they bought a policy on the employee's life? that's fairly common for important employees. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27124832) |
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Date: January 15th, 2015 8:42 PM Author: swollen trust fund abode I saw an article stating that this was for regular workers, and not execs like that BOLI/COLI stuff (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27124860) |
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Date: January 15th, 2015 10:16 PM Author: marvelous fat ankles the 60 min story was how it was for everyone not just execs.. even shit janitors and stuff.. they make tons of money cause in any given year like 3% or whatever o their workforce dies (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27125516) |
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Date: January 16th, 2015 1:25 PM Author: gay old irish cottage rigpig even so, so what? it doesn't do any harm to the dead guy or his family. and they can't all be making money, if it wasn't a net benefit to the ins co they wouldn't be writing the policies. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27128362) |
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Date: January 15th, 2015 9:08 PM Author: Insecure fantasy-prone skinny woman Biglaw folks should only get life insurance that still pays in case of killself (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27125070) |
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Date: January 15th, 2015 10:08 PM Author: fighting range wrinkle I bought one. It is okay and properly designed, but not really a home run. I never cared for it before I had kids because I was always like wait, I gotta borrow the money out of the policy for me to able to use it before I die and then suffer a negative carry on that.
Now that I have kids, I actually assign value to the death benefit and it is part of my vehicle to get all my assets off my taxable balance sheet.
There are some that are market participating (limit your upside but cap your downside so if S&P does 20, you'll get 12, but if S&P is negative, you just get 0 and don't lose)/ that seem interesting - I think those are better. |
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Date: January 21st, 2015 7:02 PM Author: swollen trust fund abode If you have paid-up additions, you should be able to surrender them for cash value (but a loan is generally better if you intend to keep as much cash as possible in the policy). (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27160184) |
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Date: January 16th, 2015 12:37 AM Author: Light Wonderful Volcanic Crater Native I love this thread. There should be a law review article analyzing claims against Northwestern Mutual scam artists. One of these guys hounded me for months, and finally I was like "send me a prospectus. send me the legal information on the specific tax shelter. Send me information regarding historic return and broker fees. Send me information regarding the specific assets and asset classes that my money will be exposed to." The guy sent me some puff advertising brochure and I lost my shit on him. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27126387) |
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Date: January 16th, 2015 1:02 AM Author: swollen trust fund abode One of the Northwestern Mutual guys told me straight up that there were no commission or fees. I didn't know anything about insurance at the time but it seemed questionable given that even low-load mutual funds have fees.
I later learned that the commissions alone are something like 75%+ of the whole life premium for the first year, PLUS potentially an additional smaller cut on each premium in the next nine years of the policy. This can be greatly reduced by using PUAs/term blending but the agents would never tell us that because that would slash their commissions by about 3/4ths. |
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Date: January 16th, 2015 1:08 AM Author: Light Wonderful Volcanic Crater Native Jesus Christ. Shouldn't he lose his license for that? Do they have licenses? I guess I don't know. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27126516) |
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Date: January 16th, 2015 1:25 AM Author: swollen trust fund abode I believe they need to be licensed, but those licenses certainly aren't preventing them from making material misrepresentations. Maybe the life insurance agency and regulatory system needs a certain amount of outright fraud to function.
My favorite part was that I asked this particular agent to change the proposed policy by blending it with term and paid-up additions to accelerate the cash accrual. He responded by blending half of it (which would in fact cut his commissions in half), but then DOUBLING the premiums (which would double his commissions). Lol . . .
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Date: January 16th, 2015 1:31 AM Author: Light Wonderful Volcanic Crater Native God damn. When I was a first year we had a wealthy old senile client that was taken by a fraudster with some bullshit finance scheme for $600,000. The client had been a hell of a businessman when he was sane, and he was a great client, so we kept taking his cases. It was my job to pitch this fraud to the local prosecutors (AG, DA, USAO), and I thought it would be easy. This was textbook fraud. The DA wouldn't even answer my phone call, my friend at the USAO got me in, and they were like we'll think about it, we've got a backlog, and the when I was talking to the AG's office, their fucking eyes glazed over. It was clear that they get this exact same complaint every day, several times a day. It's like 75% of the finance industry is committing fraud and there's nothing anyone can do about it. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27126595) |
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Date: January 16th, 2015 1:32 AM Author: swollen trust fund abode Jfc, that's awful. I've been across a few legit psychopaths who have done similar things, it's really amazing the shit that these guys get away with. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27126600) |
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Date: January 16th, 2015 1:47 AM Author: Light Wonderful Volcanic Crater Native The senile client insisted on suing the guy. The guy was the ultimate delayer. We filed for default judgment at least 4 times. Every time the guy would reappear and say another family member died or some other bullshit excuse. This is after he dodged service for 4 months. We had to hire a fucking 24 hour private investigator. We never got any discovery, he would just ignore it and once he said it was all overbroad. Finally, after spending like 500k in fees, the judge just got sick of his shit and issued terminating sanctions. Obviously the guy was judgment proof so (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27126646) |
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Date: January 16th, 2015 11:10 AM Author: Charcoal goal in life halford You raise an excellent point. This kind of shit is going on all around us, and the various prosecuting authorities have no interest whatsoever in going after these shitbags. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27127724) |
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Date: January 16th, 2015 1:30 PM Author: gay old irish cottage rigpig I've been down this road with local prosbros and AG's offices, trying to get them to look at something that was clearly criminal fraud. They are fucking useless. It's so infuriating. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27128378) |
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Date: January 16th, 2015 1:19 AM Author: Exciting Transparent Property My guy also said things that in my research I found to be demonstrably false after the research.
Cant blame these people. There is no high income group of people with as little financial savy as lawyers. Literally 90% of lawyers I know couldn't tell you the difference between and active or passive managed fund.
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Date: January 16th, 2015 1:21 AM Author: Light Wonderful Volcanic Crater Native I think lawyers are tough because our job is to sift through bullshit. I was an engineer in a prior life, and that is a gullible bunch of dudes who make solid money. A lot of them got stung by Northwestern Mutual. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27126557) |
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Date: January 16th, 2015 1:29 AM Author: swollen trust fund abode Pretty much. I have to credit the Northwestern agent with getting me pissed off and paranoid enough to research not only insurance policies, but a bunch of other load factors for mutual funds and the like and overhaul my portfolio as a inadvertent result. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27126589) |
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Date: January 16th, 2015 2:40 AM Author: Light Wonderful Volcanic Crater Native We should all record meetings with northwestern scammers and put them on YouTube (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27126779) |
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Date: January 16th, 2015 8:56 AM Author: comical jet reading party whole life is for estate planning by the wealthy - not wage slaves. All you need is term life while you have kids and/or a mortgage (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27127254) |
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Date: January 16th, 2015 12:55 PM Author: fear-inspiring brunch (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27128186) |
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Date: January 16th, 2015 8:13 PM Author: Well-lubricated immigrant https://twitter.com/Bad_Stock_Tips/status/539336484881707008
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Date: January 16th, 2015 8:44 PM Author: Light Wonderful Volcanic Crater Native Lol (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27130802) |
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Date: January 17th, 2015 8:14 AM Author: Misanthropic poppy piazza therapy When I started at my current firm, I had a Northwestern Mutual guy after me for a year and a half and he came in to give me several sales pitches. I ultimately passed but did buy some term life from him once I knew we were having a babby. Wife and I each had $500k term policies, so I just bought an additional $500k on her and an additional $1 mil on myself. I'm sure he's going to be after me in the future to "upgrade" to whole life, but fuck that.
A couple partners in my office have whole life policies with him, and I assumed that was why he hit me up. Didn't realize these dudes swoop in when a new associate starts and pushes this shit. |
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Date: January 17th, 2015 8:43 AM Author: fighting range wrinkle They sure advertise a lot during college football games too (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27133219) |
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Date: January 21st, 2015 6:20 PM Author: cream indian lodge wagecucks This entire thread is 180 (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27160032) |
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Date: January 21st, 2015 7:30 PM Author: gay old irish cottage rigpig xo is not COMPLETELY toxic and useless (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27160369) |
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Date: January 23rd, 2015 3:15 AM Author: Exciting Transparent Property I told my Northwestern Mutual guy I was not interested in the product and cancelled the second appointment. Guy literally still showed up at the reception of my law firm and asked to see me and emailed me saying he understood I was not interested but had to show me how amazing the projections were.
Told receptionist to show him out the door. What a fucking joke.
I think anytime a sales pitch gets that aggressive, I'll just assume it's a scam going forward. |
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Date: January 23rd, 2015 3:51 AM Author: lavender vigorous corn cake corner hey anyone have an opinion on this product:
the pitch is that you pick some basic index funds and your money grows tax free in the insurance vehicle. The salesman said you can withdraw the cash value without any taxation too but i need to dig deeper because i'm not sure the documentation confirms that. |
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Date: January 23rd, 2015 3:56 AM Author: Concupiscible toaster basically, anything but the most simple insurance contracts are either scams or estate-planning tools for the rich.
the average insurance purchaser is dumb and ignorant, so the insurance companies use their superior knowledge to shove unfavorable terms into their products. the more moving parts in a contract, the more the insurance companies and their salesmen can fuck you.
simple products, on the other hand, are kept honest because they're easy to compare and mostly informed people are buying them. |
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Date: January 23rd, 2015 3:44 PM Author: swollen trust fund abode there are a number of potential issues with that policy.
first, it's unclear how much sales commission ur salesman will take away. for example, say ur premiums are 10K per year. if indexed variable insurance has a commission structure similar to whole life, then ur salesman could walk away with nearly all of ur first year's commission plus even more down the road. take a look at the accumulated cash value in the first year -- if it's significantly less than ur premiums, that's not a good sign.
second, the fees on the index funds offered within the policy are much higher than those charged for low-load index funds w/vanguard, TIAA-CREF, etc. for example, the lowest-load fund on the AXA policy appears to have a load of .70%; most of them are > 1% load. that is VERY unfavorable when compared to vanguard's load of .05% for, say, VTI.
just glancing over the policy terms, it looks like the insurance wrapper will cost u at least 1% annually for the first ten years, too. there are also other misc. charges that will add up too.
so i wouldn't be surprised if there is a a drag of at least 2% on ur investments on top of the very substantial cash accrual problems.
there also appears to be a surrender fee so if u want to get out of the policy, u will incur additional costs.
so the Q is whether taking the initial cash accrual hit (let's say that u lose 10K the first year, plus 1K for the next nine years), plus a 2% drag on ur investments, is worth the tax deferral. i think the answer is very likely "no" especially if u're investing in tax-efficient ETFs but u'd have to crunch the numbers to confirm. |
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Date: January 23rd, 2015 6:10 PM Author: gay old irish cottage rigpig you should be blogging this shit for a wider audience (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27173272) |
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Date: January 24th, 2015 12:32 AM Author: swollen trust fund abode ha, i would if i were more confident about my conclusions, but each policy is so complicated that it would take dozens of hours to fully understand each one. i think that brandon at theinsuranceproblog.com makes the best case for insurance, and white coat investor at whitecoatinvestor.com makes the best against insurance. so between those two there is some pretty decent coverage.
it looks like the cash accrual hit is about 6% per premium payment on the AXA product + the other fees, so in the aggregate not nearly as bad as whole life insurance. but, tons of high-load index funds. in a way, it's brilliant; they lock u into a universe of funds that they (or their partners) run, so u have no choice but to pay them fees for ur investments. |
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Date: January 23rd, 2015 6:25 PM Author: chartreuse confused crackhouse saaaaavy (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27173384) |
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Date: February 16th, 2015 2:57 PM Author: swollen trust fund abode Not to beat a dead horse, but for any of u biglaw ladies and gents out there, keep in mind that the whole point of these VUL/UL/whole life policies is to gain a fraction of the benefits of a Roth IRA. The only benefit that Whole life and UL have over a Roth IRA + term insurance is that Whole Life and UL have greater liquidity over gains and slightly better options w/ur death benefit.
That's not to say that whole life and UL are bad (actually I think optimized policies are quite good), but this shows how powerful Roth IRAs are. If u aren't doing a backdoor Roth IRAs every year (and u don't have a trad IRA that could fuck up the conversion) u are throwing away a huge opportunity. |
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Date: February 17th, 2015 12:25 PM Author: ruby godawful dilemma tank I'm meeting with one of these northwestern guys on thursday. I told him I wasn't going to give him a dime or give him any leads. He still insisted. He's a close friend of a close friend so it's difficult to straight up tell him to fuck off. Finally I agreed to get coffee. I already told him I'm not interested in his product and explained why. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27333772) |
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Date: February 17th, 2015 12:35 PM Author: swollen trust fund abode some key questions for him assuming that he is pitching whole life insurance (i don't necessarily know the answers to these, but i would be interested to know NWM's stance):
(1) what is his total sales commission, not just for the first year;
(2) if he doesn't suggest blending with term, suggest it; also ask if you can use term outside the policy which can accomplish the same objective of raising the MEC limit and may be cheaper than cash inside;
(3) why has NML's dividend consistently trended down (around 5%, iirc) so that it is lower than Penn Mutual (6%) and Mass Mutual (8%, though this may not be the net figure);
(4) how will NML react to the persistent low-interest rate environment, and what will happen if interest rates suddenly rise;
(5) what is the spread between NML's interest rates on policy loans and the dividends; is this fixed by contract or does it float; why is NML's interest rate so high at 8%
(6) what is the breakeven point in CSV (should be around year 5-6)
(7) what is the ultimate distributable CSV as time goes on (that is, even if ur policy accumulates lots of cash, not all of it may be distributed, which is important for retirement planning)
(8) are there any surrender charges |
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Date: February 17th, 2015 12:39 PM Author: ruby godawful dilemma tank Can you post some links I can use to confront him with this stuff? I'm sure he'll try to sell me. I'm not sure I want to bone up for some meeting I don't even want to go to (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27333861) |
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Date: February 17th, 2015 12:47 PM Author: swollen trust fund abode sure -- all of this assumes that he's pitching whole life and not VUL or some other cash-value variation, but here are some links. FYI I really like the guy who runs the blog as he knows a lot and actually owns the kinds of policies that he sells:
for an introduction to blending: http://theinsuranceproblog.com/whole-life-blending-does-cash-value-life-insurance-design-really-matter/
more on blending: http://www.glenndaily.com/documents/blending.pdf, http://www.consumerfed.org/pdfs/Misc-Observations-Life-Insurance-2011.pdf
for an illustration of a past NML policy designed by an actuary that actually broke even early on: http://theinsuranceproblog.com/does-blended-whole-life-really-work-historical-proof/
(this approach still works but i checked with an NML agent recently and yields are disappointing, around 2% IRR at 10 years, so i am not sure if i would even go with an optimized NML design)
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Date: February 17th, 2015 1:24 PM Author: swollen trust fund abode Below is a telling excerpt from the Hunt consumer report. Note that on a pure WL product (the one that's usually pitched), commission and sales charges are > 85% of the first year's premium and up to 7.5% of the premiums for the next ten years. In other words, if you're paying in 10K per year, you just LOST 8.5K in the first year alone, and another 7.5K over the next 10 years just to sales commissions and taxes.
Alternatively, you can minimize the proportion of WL and use term to fill in the missing death benefit. Over time, you use your dividends and riders to add "paid up additions", which are the same thing as pure WL, but cost way less (~5% fees, most of which are taxes). Say your yearly premium is 10K, but only 2.5K of that is WL. That means that you only lose about 2.5K (2.1K + ~$400) in the first year's premium to sales. And over the next ten years, you only lose 5.6K to sales fees/taxes.
Over a long time, you end up with pretty much the same policy, since the paid-up additions (the tiny whole life policies) gradually replace the entire term portion. But, the yield on a blended policy is >>> the yield on pure whole life. Equally important, the blended policy starts accumulating cash value immediately, which means you can start using this cash right away via policy loans.
***
Blending can be very effective for a proposed buyer of a cash value policy. Most conventional whole life sales illustrations show a zero or near-zero first year surrender value. (Universal Life and Variable Universal Life operate with explicit surrender charges while Whole Life has implicit surrender charges. Thus with WL one sees a zero cash value in the illustration but UL and VUL show two columns of cash values, one with several names, depending on the life insurer’s choice of terminology: Cash Value, Account Value, or Policy Value. Each of these is before application of any surrender charge; each represents the cash value that is invested. The column with the lower values, whatever its name, is the surrender value. The two columns converge in the year when surrender charge is zero.) If WL, you are probably looking at a unitary contract: one premium and one policy form, say a $500,000 face amount with $20,000 premiums. Commissions and sales charges on a garden variety WL like this might consume up to 85% of the first year’s premium and up to 7.5% of premiums for years 2 to 10, and, of course, the life insurer has its own costs of the medical evaluation and other administrative expenses. Note that, roughly speaking, in year one, this WL insurer’s ―amount at risk‖ is not $500,000 but $500,000 less some fraction of the first premium that’s left over, perhaps zero. (Note also that with reinvestment of dividends in paid-up additional insurance (PUAs), death benefits will rise in future.) If a cash value develops in year two, the insurer’s amount at risk will be reduced by the cash value, and so forth in subsequent policy years. We could, if we wished, call these reducing amounts at risk ―term insurance.
Using the $500,000 example, there are normally three components of a blended policy, which the author refers to as a WL hybrid: (a) a base WL policy of, say, $100,000, paying full commissions; (b) a one-year term (OYT) rider with different names for $400,000, also producing full commissions but on the much lower dollar component of the total premium; and (c) a paid-up additions (PUA) rider in a premium amount that can be $20,000 less the premium for (a) less that for (b). The PUA rider goes into the policy at a premium deduction of, say, 8%, with commissions of a bit less than half that to the agent; the savings come from component (c). For purposes of comparing the resulting blended or hybrid illustration to the original illustration, the premium should be kept the same, $20,000; one matches the premium, then compares resulting death benefits and cash surrender values. Normally, this hybrid produces a level death benefit while a conventional WL proposal shows a rising benefit from PUAs; in this event, we suggest increasing the OYT rider such that the total death benefit is higher than the rising death benefit for about 12 or 13 years, roughly matching the full commission policy’s death benefits over 20 years. |
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Date: February 18th, 2015 7:54 PM Author: electric bearded casino nowag wait, did I write this? (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27344571) |
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Date: February 18th, 2015 7:59 PM Author: swollen trust fund abode many poasters here prolly have met the same cast of characters from NML throughout the years
bring the blending consumer federation doc with u to the meeting. ask about the IRR of NML for policies originated NOW (not the stuff that he/she might show u about policies originated in the '80s). ask if other insurance cos have higher IRR for new policies. |
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Date: February 18th, 2015 7:52 PM Author: swollen trust fund abode One of the objections to whole life is that you have to pay large premiums over a long period of time or the policy will lapse. But, this is largely addressed by blending the policy with term and using paid-up additions. Besides accruing cash value much faster and generating much better internal rates of return, blended whole life also gives you much more flexibility in terms of paying the premium.
All blended policies still require you to pay the whole-life portion of the premium for the policy to stay in force (or, alternatively, pay that portion from dividends or the cash value). However, if your policy is blended at 2500 whole life/7500 paid-up additions, some policies will permit you to pay just 2500.
Of course, if that happens, your whole life policy will behave like a pure whole life policy for that year, i.e. have crappier cash accumulation that year. But, it won't lapse. This effectively gives you much of the flexibility of a UL policy. |
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Date: February 18th, 2015 7:59 PM Author: gay old irish cottage rigpig keep poasting this shit bro, i'm still reading and enjoying. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27344621) |
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Date: February 18th, 2015 8:01 PM Author: swollen trust fund abode tyft, i am a man obsessed with cash-value insurance and can't stop, won't stop poasting about it (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27344643) |
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Date: February 18th, 2015 8:09 PM Author: gay old irish cottage rigpig i am shitlaw boss, or shitlaw boss lite anyway, and we have a fair amount of wealthy clients who we end up counseling on investments, etc. you should see some of the shit (not just life insurance, but that's one of them) that these people bring us to review... hopefully before they sign up but often after. this isn't my area of expertise, that's up to the main shitlaw boss, but i'm in on a lot of these meetings and although i can usually smell a scam it's nice to be able to explain why it's a scam and how to make a certain investment less scam-y. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27344715) |
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Date: February 18th, 2015 8:17 PM Author: swollen trust fund abode that's pretty smart, you can build up a lot of credibility with your clients by lifting the veil.
i have seen a bunch of biglaw lawyers get trapped into high-load VULs and the like. which is not to that all insurance products are bad, but when they're bad, it's sort of mind-boggling just how bad they are. morally speaking, pitching these policies seems to be on the level of white-collar crime.
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Date: February 18th, 2015 9:00 PM Author: gay old irish cottage rigpig yeah, we have some people who are in decent and fairly complicated life insurance plans... so i know they can be used if you know what you're doing. i'm learning bit by bit how to set these up, which is why i'm interested in the thread.
the secretaries call call me 'the cynic' because anytime a transaction or a sales pitch comes up (whether for the firm or a client or just in conversation) my first reaction is usually "that's a scam." but you know what? it usually is a fucking scam, it just depends HOW badly you're getting scammed vs. the alternatives.
i checked out a book on great grifters and scam artists from the library a while back but i never finished it. i think i'm gonna go check that thing out again. |
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Date: February 20th, 2015 4:34 PM Author: swollen trust fund abode I think what's really interesting about the whole-life policies is that the agents have two ways of talking to you about it
if u have no experience with cash value insurance they will pitch u some absurd policy that nobody in their right mind would buy
if u have some experience with how a cash value policy should behave, they actually start designing stuff in a way that's quite helpful
i find the entire thing fascinating because whole life is simultaneously a scam and a great product and your experience with ur agent will largely be driven by how much reading u've done about it |
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Date: February 21st, 2015 6:12 PM Author: gay old irish cottage rigpig lawyers think they understand insurance because they copped dat A- in contracts when in fact they are morons. we really are the perfect audience. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27364428) |
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Date: February 21st, 2015 6:45 PM Author: swollen trust fund abode the thought of a fresh 1st year interested in working in "international law" meeting with a slick salesman from one of these companies makes me cringe
we are basically sheep being herded to the slaughter |
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Date: February 19th, 2015 1:16 PM Author: swollen trust fund abode Phone just rang from a Northwestern Mutual agent. The agent could NOT wait to hang up after I mentioned blending and chasing IRR yield across multiple carriers. But, to his credit, this agent seemed to be pretty honest and point-blank said that whole-life policies are only worth it if u're looking for a death benefit for a survivor. I don't think that's necessarily true (that's certainly not the way I use my policy), but it's unusually fair for an insurance agent. He even mentioned the backdoor Roth IRA as well.
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Date: February 20th, 2015 4:25 PM Author: swollen trust fund abode Just met with a totally different NML agent. I had requested a 1:999 whole life to insurance blend. He ran a 1:4 blend instead (not intentionally, something probably got lost in translation) and gave me an illustration with an IRR of 1.86% after 10 years and 3.27% after 15 years.
During the meeting, I requested an illustration with the maximum amount of blending permitted, which was 1:20 on a slightly different product with a much lower death benefit. He re-ran the projections, which gave an IRR of 2.58% and 3.77% after 15 years.
Anyway, the point is that even within the same insurance carrier, the design of a whole-life policy can yield very different results. Here, the first design would have been more appropriate for someone who had children due to the markedly higher death benefit. But, the second design would have dominated from the standpoint of accruing cash earlier (in fact, it broke even at year 3), and both short-term and mid-term IRR. |
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Date: February 21st, 2015 5:10 PM Author: swollen trust fund abode So let's compare several Northwestern Mutual illustrations to show how the stark difference between a scam and (in my view) a reasonable savings vehicle.
First, let's look at a "bad" pure whole life policy from Northwestern Mutual that was pitched to me. That policy would require me to pay about 16K per year into the policy. During the first year, only $1,770 makes it safely into the policy. At year 5, the cash value surrender value of the policy is only $54,301. At year 10, the cash surrender value of the policy is only $143,026. Pretty crappy, considering that you put in 160K of premiums into it and are still about 17K in the hole.
Now let's look at "better" blended whole life policy (blended 1:4) from Northwestern Mutual, which also requires me to pay 16K in yearly premiums. That policy accumulates $11,256 of cash surrender value during the first year, $74,868 at year during the fifth year, and $177,296 at year 10. So, you made about 17K relative to what you put in.
And, the second one isn't really a heavily-optimized policy. There are probably substantially better ones out there. But, the fact is that if you went with option #1 vs option #2, you would have lost about $34K over a 10-year time period. Over time, this difference will grow substantially so it option #1 just gets worse and worse.
Worse, due to the slow buildup of cash in option #1, it would be effectively an illiquid asset. Option #2, on the other hand, would allow you to take policy loans with a slight negative spread between the loan interest rate (about .5% per year, simple interest) and the dividend accrual, and invest in more lucrative options.
You do get a slightly higher death benefit with option #1 (1.15 mil over 1 mil for option #2) but unless you're planning to die soon that doesn't really make a big difference, you could easily buy term to supplement, and the death benefit for option #2 will eventually catch up to and dominate option #1 over time.
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Date: February 21st, 2015 5:15 PM Author: ruby godawful dilemma tank Thanks for this. I finally got through to the guy that I'm not going to buy anything. He asked for references. I gave him the names of people I dislike. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27364064) |
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Date: February 21st, 2015 5:17 PM Author: swollen trust fund abode that's a 180 tactic and i intend to deploy it in the near future (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27364075) |
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Date: February 21st, 2015 5:18 PM Author: comical jet reading party I'm not disagreeing that whole life is a scam, but when you are comparing them to savings, you need to back out whatever you would have paid for a term life policy with the same death benefit (if you have a kid, you must have either a whole or a term life policy). So, your investment isn't $16k a year, but the difference of $16k a year over an equivalent term life premium. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27364091) |
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Date: February 21st, 2015 5:25 PM Author: swollen trust fund abode Fair point, the purpose of the comparison above was to compare WL policies against each other rather than against savings. Term for 20 years is pretty cheap for biglaw associates, like $500 per year or something like that, so you could back out about 5K from the projections above for the 10 year period.
EDIT -- but if we are really comparing term vs whole life in the context of savings, then we'd have to also consider that "savings" could include term + the rest of the 16K premium invested in equivalent assets, like t-bonds or CDs. This would significantly mitigate the cost adjustment from backing out term |
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Date: February 21st, 2015 6:10 PM Author: gay old irish cottage rigpig ty (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27364414) |
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Date: February 21st, 2015 6:17 PM Author: gaped school I work at an ibank. How come we never get pitched like what you guys are describing? (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27364468) |
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Date: February 21st, 2015 6:38 PM Author: swollen trust fund abode some of my PE friends have been pitched
but in general it seems like it would be a crap idea to pitch poor-yielding investments schemes to a guy whose profession is to value stuff and maximize yields
lawyers, on the other hand, have no point of reference. most associates have no idea how much the historical annual return on the stock or bond markets are. so when they see something like 3% IRR over 25 years on a bad whole life policy, they have no way of knowing, off the top of their head, that this is a pretty crap place to put their money even given the safe profile of the asset class
this is not even getting into VULs or the myriad other even more complex instruments that get pitched every other week
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Date: February 22nd, 2015 8:59 AM Author: fighting range wrinkle Have you looked into premium financing - obtaining a loan from a bank secured by cash value of the policy (i.e. not getting a loan from the insurance company and paying the negative carry and using the proceeds to do whatever or to just pay your annual premium)? (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27368299) |
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Date: February 22nd, 2015 9:12 AM Author: fighting range wrinkle Also, what are your thoughts on when to move the policy over to a life insurance trust and take the ding against your lifetime exemption? (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27368320) |
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Date: February 23rd, 2015 10:42 AM Author: fighting range wrinkle bump for eeyore (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27375689) |
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Date: February 25th, 2015 3:03 PM Author: fighting range wrinkle last bump (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27389820) |
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Date: February 25th, 2015 3:41 PM Author: swollen trust fund abode Sorry PTB, missed these Qs. I haven't looked into these (I'm not rich enough where the trust issue has arose, and premium financing is generally for rich people too) but will let you know if I find anything useful. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27390003) |
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Date: February 26th, 2015 12:03 AM Author: fighting range wrinkle OK, cool. Thanks for all the info and analysis. I was too lazy to do all of it. (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#27393213) |
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Date: May 14th, 2015 4:58 PM Author: swollen trust fund abode So I actually began exploring this idea recently and spoke with my insurance contact about it. Apparently premium financing with HELOCs used to be quite popular, although it is not something that happens that often now.
I am analyzing whether it would make sense to use margin loans to finance an IUL. Ideally, during events that increase a risk for a margin call, a policy loan could be issued to address the maintenance margin, with some separate bridge loan capacity to immediately address any margin call as insurance policy loans can take weeks to issue. As with any premium financing, this will only work if the margin loan interest rates continue to stay low. In addition, the policy should have early cash value and low surrender charges (in case of liquidation). |
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Date: February 27th, 2015 4:11 PM Author: swollen trust fund abode Putting aside all the numbers, here are two common-sense questions that u should ask ur agent when he's pitching you a whole life OR term policy:
(1) Does your insurance agent own the same policy with the same design? Only two of the insurance brokers I worked with owned the actual policies with the same design that they were selling, and they were also by far the most knowledgeable about the products. Keep in mind that, as shown above, the fact that an agent owns a policy issued by company X does not mean u should buy a policy issued by company X -- the design of the policy can totally change the commission structure and performance of policies issued by the same company.
(2) In New York, insurance agents and brokers are required, by law, to disclose their compensation, but only if you ask for that disclosure. See http://www.dfs.ny.gov/insurance/faqs/faqs-reg194.htm If your broker or agent is designing the policy correctly, they shouldn't be afraid of disclosing the fee. I'll probably end up paying about 3K up front to my broker in commissions and another 3K over the life of my whole life policy, and his advice was worth every cent.
But, in the words of the former CEO of NY Life, many agents are not so keen to disclose the truth:
CEO: The life sale is a very difficult sale. People have to talk about their mortality, about how much money they really need. It's very complicated. If right in the middle of this discussion, you throw in: 'And by the way, there's a 55% commission,'...You won't get the sale. You've now created enough of a hurdle to kill that form of distribution, and that's the only form that's proven successful in getting life insurance really out. Plus, you're going to create the potential for rebating, which is against the law in most states. There would be pressure for rebates. And once you do that, then you start affecting the income of these agents. Most of them don't even make it. The industry is lucky to keep 20% after four years. If all of a sudden rebating takes place, and their effective commission is cut back because they're trying to compete on commissions, you get rid of the career agency system...and many fewer people would have life insurance."
Sy Sternberg, CEO of New York Life Insurance Co., quoted in Best's Review, February 2005 |
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Date: May 2nd, 2019 10:11 AM Author: avocado shrine doctorate This should be bumped every September (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#38174521) |
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Date: May 2nd, 2019 10:14 AM Author: chestnut stead gunner (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#38174530) |
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Date: March 29th, 2023 3:59 PM Author: avocado shrine doctorate (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#46114734) |
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Date: September 23rd, 2023 5:46 PM Author: Mahogany point sandwich (http://www.autoadmit.com/thread.php?thread_id=2783240&forum_id=2#46834519) |