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right now in the "flexible premium" you are most likely paying the minimum...which means, unless you start paying more now (FUNDING), this policy might not be there at the end. Have your agent run an illustration to see when this premium arrangement becomes a "problem". They can also advise on how to properly fund it under MEC guidelines (Modified Endowment Contract...this is when the IRS has determined that this contract is no longer Insurance).
I'm not sure what your goal for this policy is...meaning the purpose of life insurance is to:
provide for future lost income if you were to die
Pass assets onto heirs
Help distribute assets from your estate (or make it fair to your beneficiaries).
Life insurance is not intended to "Build Wealth" or "Create Wealth", it's more to "Maintain Wealth".
My goal was to pay the $2K premium every year until I die. I wanted a fixed premium in return for a 300k death benefit no matter how long I lived. It was never intended to be an investment vehicle.
What document in the policy should I look at? All the various documents list 300K as the death benefit.
I don't want to worry about underfunding in the future.
My goal was to pay the $2K premium every year until I die. I wanted a fixed premium in return for a 300k death benefit no matter how long I lived. It was never intended to be an investment vehicle.
What document in the policy should I look at? All the various documents list 300K as the death benefit.
I don't want to worry about underfunding in the future.
You need a whole life policy then. You can actually get some that you stop paying at age 70 vs paying for life but they are considered paid up then and don't go away. I'll reiterate my suggestion to look at one of the mutual companies for a policy like this. It is going to cost more but in the end you will get your money back and then some vs chancing losing everything you have in the policy and then some.
I'm finding it crazy that if I pay the premium every year there would be a scenario that it wouldn't pay out the full death benefit.
The original selling agent is no longer there so I'll talk with his replacement next week.
Gg-how could I lose everything, much less a reduced death benefit, and then some if I keep paying the premiums and the company-one of the Allstate cousins-remains solvent?
I'm finding it crazy that if I pay the premium every year there would be a scenario that it wouldn't pay out the full death benefit.
The original selling agent is no longer there so I'll talk with his replacement next week.
Gg-how could I lose everything, much less a reduced death benefit, and then some if I keep paying the premiums and the company-one of the Allstate cousins-remains solvent?
If the policy is in force when you die, then yes it will pay. However, a UL policy will lapse when the cash values are no longer sufficient to cover the cost of insurance and policy administrative expense.
How much control do I have over the cash value? Isn't that a function of my premiums minus costs plus whatever interest it earns? Shouldn't that be the risk taken by the insurer in return for my premium?
What I am getting from both of you is market forces could combine to make the policy worthless.
Now I am worried this is not as secure as I thought it was.
How much control do I have over the cash value? Isn't that a function of my premiums minus costs plus whatever interest it earns? Shouldn't that be the risk taken by the insurer in return for my premium?
not really with the product you have. Investment risk is shifted to you. That's how the product was designed.
Quote:
Originally Posted by RMD3819
What I am getting from both of you is market forces could combine to make the policy worthless.
Yes, this is a fair statement.
Quote:
Originally Posted by RMD3819
Now I am worried this is not as secure as I thought it was.
I'm finding it crazy that if I pay the premium every year there would be a scenario that it wouldn't pay out the full death benefit.
The original selling agent is no longer there so I'll talk with his replacement next week.
Gg-how could I lose everything, much less a reduced death benefit, and then some if I keep paying the premiums and the company-one of the Allstate cousins-remains solvent?
With a "flexible premium" policy, especially since you are paying the minimum, if costs go up and you don't change your payment, eventually those costs will eat away at the cash value and death benefit and could reduce it to little or nothing---right when you need it. Those cost will increase dramatically when you are in your 60's and beyond. Solvency is an issue and when you are buying life insurance from a property and casualty company the fees tend to be higher because they don't have the book of business to invest those funds as prudently as other companies who are in the business to sell life insurance.
Allstate is an A+ or A rated company, depending on the agency...a company like Northwestern Mutual is A++ or AAA. While it doesn't seem like much, there are probably 100 companies rated better than Allstate and no one better than Northwestern Mutual. It just is what it is. We've had NM for 25 years and our policies are very healthy!. For what you need, you need better. If it was just some term policy that will never pay out, go for cheep but since your wife is counting on these funds to carry her through her life, it's just not worth the chance... at least it wouldn't be for me.
In the meantime can you guesstimate what my premium might be with one of those other policies?
Probably double what you are paying, but you will get your premium back and then some with the policy. I think our break even point with lifetime premiums vs cash value and/or death benefit was about 15-16 years. After that the dividend paid more than pays for the premium if you needed to use that to cover your costs. I don't suggest you do that unless you have to because it does cut down on the growth in the policy. Also, you might not needs AS big of a policy because as the cash value grows so does the death benefit. I would NOT suggest getting a policy like this from Allstate, however. They just won't have the returns like the mutual companies do. Our dividend is a bit over 6% right now and that is as LOW as it's been in years. They have never not paid a dividend in over 100 years (at Northwestern Mutual). Skip the Allstate guy and call a local Northwestern office in your area. Ask for someone that specializes in pension pay outs and they can help you. I could get you my guy's name but I don't think you live near me .
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