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Message
Help - Life insurance question (A little long)
Posted on 2/7/25 at 3:39 pm
Posted on 2/7/25 at 3:39 pm
Hoping someone with knowledge in this area might offer some advice or comments. I have a very old policy that was offered back then as Target Life. I wasn't able to pay the premiums for a period of years back some time ago.
I was contacted about the diminishing cash value of the policy about 10 years ago and we increased the premium to keep the policy in force.
Not a big policy in today's world (about $70k) but was adequate then when I had kids at home and all. Now we are at a point where even the increased premium is not keeping up with the insurance cost and the have worked up some new proposals to keep in in force if I want to do that.
However, to keep it in force by their projections for 10 more years or so would require almost $7-9k per year. I also noted that over the years I have paid already $55k in premiums. My argument was that look, I have already paid $55k and you want me to pay $7-8k a year more to keep it up ? Within 2-3 years I will have paid you more than the value of the policy. Where did that money go and why would I have to keep paying you potentially much more than the policy value. Doesn't make any sense to me.
The reply was "well, that's not how life insurance works " Really ?
In any case, it's too late to buy an new policy at any decent rate and I don't have to have it to put me in the ground. I would like to leave my (much) younger wife a little more when I'm gone but even she says "that's stupid to pay that much".
Their answer is "well give us a bunch of cash and we will write you an annuity to pay the premium". So, you want me to give you a pile of cash and over the next 5-10 years you will fricking give me my own money back so I can pay you some more ? WHAT ? Am I missing something here ?
Anyone have similar problems or thoughts on this ? The insurer provides a raft of charts, projections etc showing me what a "great deal" this is for me - lol. I have an MBA in finance but no insurance background so I can't even figure this out.
I was contacted about the diminishing cash value of the policy about 10 years ago and we increased the premium to keep the policy in force.
Not a big policy in today's world (about $70k) but was adequate then when I had kids at home and all. Now we are at a point where even the increased premium is not keeping up with the insurance cost and the have worked up some new proposals to keep in in force if I want to do that.
However, to keep it in force by their projections for 10 more years or so would require almost $7-9k per year. I also noted that over the years I have paid already $55k in premiums. My argument was that look, I have already paid $55k and you want me to pay $7-8k a year more to keep it up ? Within 2-3 years I will have paid you more than the value of the policy. Where did that money go and why would I have to keep paying you potentially much more than the policy value. Doesn't make any sense to me.
The reply was "well, that's not how life insurance works " Really ?
In any case, it's too late to buy an new policy at any decent rate and I don't have to have it to put me in the ground. I would like to leave my (much) younger wife a little more when I'm gone but even she says "that's stupid to pay that much".
Their answer is "well give us a bunch of cash and we will write you an annuity to pay the premium". So, you want me to give you a pile of cash and over the next 5-10 years you will fricking give me my own money back so I can pay you some more ? WHAT ? Am I missing something here ?
Anyone have similar problems or thoughts on this ? The insurer provides a raft of charts, projections etc showing me what a "great deal" this is for me - lol. I have an MBA in finance but no insurance background so I can't even figure this out.
5
Posted on 2/7/25 at 4:29 pm to ArkBengal
It's a universal life policy. The insurance cost is based upon "net amount at risk". This is the difference between the cash value and death benefit.
This cost is calculated annually based upon your attained age. It was imperative to pay a higher premium when the interest rate assumption dropped to likely 3 or 4%. Your initial premium was likely based upon double digit or high single digit interest assumptions on growing your internal cash value.
The goal is for the cash value to meet the death benefit to keep that net amount at risk low. They waited too long to adjust the premium. The policy is also too small to sell on the secondary market.
Either cash it out or ride it until it dies, IMO. 24 years experience in the industry, fyi.
ETA: you can also reduce the death benefit to possibly extend the duration.
This cost is calculated annually based upon your attained age. It was imperative to pay a higher premium when the interest rate assumption dropped to likely 3 or 4%. Your initial premium was likely based upon double digit or high single digit interest assumptions on growing your internal cash value.
The goal is for the cash value to meet the death benefit to keep that net amount at risk low. They waited too long to adjust the premium. The policy is also too small to sell on the secondary market.
Either cash it out or ride it until it dies, IMO. 24 years experience in the industry, fyi.
ETA: you can also reduce the death benefit to possibly extend the duration.
This post was edited on 2/7/25 at 4:35 pm
Posted on 2/7/25 at 5:01 pm to ArkBengal
You’ve been ridden hard for years by a predatory agent. Term, term, term all the way 9.999999/10 times because of this very scenario you find yourself in now.
Posted on 2/7/25 at 8:44 pm to iknowmorethanyou
Yes, thanks. I am looking at those options currently. I guess my problem is the amount of premium I have/will have paid will be more than the policy pays within a couple of years if I keep it. That’s what irritates me I guess - they have had that stream of premiums all along plus any investment income they earned. But even if they earned zero, I have deposited over $55k with them over the years and they have had essentially no costs, excluding commissions and fees I guess. What happened to that money, plus any more I might pay until I have remitted the entire value of the policy ? Where is that money ?
Posted on 2/7/25 at 8:56 pm to TDsngumbo
Well I don’t disagree with what you said. Saying that, I do shoulder part of the blame for not keeping current on the premiums due to “life” things. But it is what it is a this point and there are no good choices remaining. Just frustrating over there explanations of the discrepancy mentioned about premiums actually paid versus policy value
Posted on 2/8/25 at 1:44 am to TDsngumbo
(no message)
This post was edited on 2/8/25 at 2:06 am
Posted on 2/8/25 at 7:02 am to ArkBengal
Yep universal life policy all the way. They were okay policies if you knew and understood what you were buying and overfunded them. You aren’t alone, lots of people were in the same boat with these type policies as interest rates fell. You can either take what cash remains or pay the additional premium to keep it going but it’s a lost cause the longer you live.
Posted on 2/8/25 at 8:02 am to ArkBengal
Sorry to read about your situation.
If you live 10 more years, and sock away $7k per yr, you’ll be ahead.
Is there any cash value?
As another poster mentioned, cash out what you can and walk away. It sucks, but it’s the best decision, assuming you live 10 more years.
If you live 10 more years, and sock away $7k per yr, you’ll be ahead.
Is there any cash value?
As another poster mentioned, cash out what you can and walk away. It sucks, but it’s the best decision, assuming you live 10 more years.
Posted on 2/8/25 at 8:36 am to ArkBengal
This post was edited on 2/18/25 at 8:26 am
Posted on 2/8/25 at 3:35 pm to BestBanker
quote:
Ask the agent to explain what you've asked here, and you'll learn that he/she cannot.
Yes, good answer. This has been my experience, followed by a bunch of trade gobbledygook out of their training manuals. And current agent has been in the business over 50 years but was not my original agent due to deaths, moves, etc.
Anyway, thanks to all for the replies. Just trying to see if I was overlooking any obvious explanations
Posted on 2/10/25 at 7:57 pm to ArkBengal
quote:
ArkBengal
Crap like this is why Life Insurance companies get a bad rap. What is the name of this company your dealing with?
Posted on 2/10/25 at 10:09 pm to ArkBengal
I retired after 36 years in the industry. (Property and Casualty Insurance). I never could get an agent to make a winning argument for Whole or Uni life. The best they could do was... " we invest better than you can. Term insurance has less long term protection ". The costs never made sense to me.
Raised 3 daughters and always bought term. I did have to medically quality every 10 years (after the term expired). I still have a smaller term policy at 59.
Buy term and invest the difference. It is the winning ticket.
Raised 3 daughters and always bought term. I did have to medically quality every 10 years (after the term expired). I still have a smaller term policy at 59.
Buy term and invest the difference. It is the winning ticket.
Posted on 2/11/25 at 3:46 pm to La Place Mike
New York Life, but I would expect the results to be similar for that type policy with any of them
Posted on 2/11/25 at 5:32 pm to ArkBengal
No, not necessarily. It really depends on the agent. A different NYL rep may give completely different advice.
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