1. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
CASE STUDIES
CASE CLOSED
CASE DESIGN
TODAY’S PRESENTATION
The Case for Whole Life
Burt Snover, ChFC, CLU
President – CompEdge Financial
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2. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
THE HISTORY OF WHOLE LIFE
Life Insurance 1840 – “The Proposition”
You pay the life insurance company a nominal sum every year for the rest of your life and they will pay a much larger amount to your beneficiary at death
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3. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
THE HISTORY OF WHOLE LIFE
Total Estimated U.S. Death Benefit In Force in 1840?
$14.5 Million
Total Estimated U.S. Death Benefit In Force in 1853?
$100 Million
48 Companies – All but one were Mutual
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4. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
THE HISTORY OF WHOLE LIFE
Beneficiary Protections
Women’s Property Rights
The Civil War
Non-Forfeiture Laws
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5. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
THE HISTORY OF WL…NON-FORFEITURE LAWS
The first non-forfeiture option?
Extended Term Insurance
1880 Massachusetts adds Cash Value as a N-F Option
Reduced Paid Up & Fully Paid Up Options now available.
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6. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
THE HISTORY OF WL…NON-FORFEITURE LAWS
As originally conceived, was Whole Life an instrument that built Cash Value?
A: No
Was it Permanent?
A: Yes
Why does it now have “term” and Cash Value calculations?
A: The Law…Non-Forfeiture Options
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7. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
THE HISTORY OF WHOLE LIFE
From the days of Elizur Wright to the early 1970’s, Whole Life Insurance WAS life insurance….an undisputed savings & protection vehicle.
It STILL is a source of funds of last resort.
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8. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
THE HISTORY OF WHOLE LIFE
So what happened to shake the foundational use of permanent life insurance?
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9. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
THE HISTORY OF WHOLE LIFE
What is the real solution to combating Inflation?
A Policy that allows you to buy more coverage at regular intervals allowing you to leave the interest-rate risk with the Insurance Company.
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10. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
OPTION TO PURCHASE ADDITIONAL
INSURANCE (OPAI)
Rider that can provide up to $1 million+ in guaranteed insurability.
Option Ages: 22, 25, 28, 31, 34, 37, 40, 43*, 46* & 49*
$50k to $100k options dependent upon carrier & Issue Age on Base Policy
Marriage, Stork & Separation of Service/Retirement Options available dependent upon carrier.
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11. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
THE POWER OF OPAI
21 Yr Old Male buys $100k Base WL policy with $100k OPAI Rider for $56.92/month
Takes every option 22, 25, 28, 31, 34, 37 & 40
Total Monthly Age 40: $583.05/month
Total Permanent Age 40: $800,000
Total Guaranteed Cash Age 40: $46,833
Total Reduced Paid-Up 40: $220,400
3 contingent options as well as marriage & stork options still available
40 Yr Old Male buys $800k GUL policy for $558.67/month
Must go through underwriting & qualify
No guaranteed Cash Values
No Reduced Paid-Up Value
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12. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
LIFE INSURANCE…A PERSPECTIVE
If the premiums were the same for a given death benefit, would you rather own a Whole Life Policy or Term Policy?
Why would people gravitate to the term policy?
A: Cost
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13. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
LIFE INSURANCE…A PERSPECTIVE
Did you know…
At some point, the GCV of Whole Life Insurance will exceed the premiums you have paid?
Whole Life Insurance
The Coverage is Permanent while the out-of-pocket cost is Temporary
Term Insurance
The Coverage is Temporary while the out-of-pocket cost is Permanent
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14. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
DON’T WASTE TIME ON IDEOLOGY
All Life Insurance is Term Insurance.
The difference is how, and how long, you pay for it!
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15. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
WHAT ABOUT DAVE RAMSEY?
Myth: Cash value life insurance, like whole life, will help me retire wealthy.
Truth: Cash value life insurance is one of the worst financial products available.
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16. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
WHAT ABOUT DAVE RAMSEY?
A Better Plan
If you follow my Total Money Makeover plan, you will begin investing well. Then, when you are 57 years old and the kids are grown and gone, the house is paid for, and you have $700,000 in mutual funds, you'll become self-insured. That means when your 20-year term is up, you shouldn't need life insurance at all—because with no kids to feed, no house payment and $700,000, your spouse will just have to suffer through if you die without insurance.
Don't do cash value insurance! Buy term and invest the difference.
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17. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
Liberty National WL vs Self-Funding
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18. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
TVM Calculator…6%
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19. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
TVM Calculator…8%
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20. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
TVM Calculator…10%
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21. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
ZANDER INSURANCE GROUP
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22. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
ZANDER 20 Year Level Term Quotes
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23. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
20 Year Level Term
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24. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
Liberty National Whole Life
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25. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
Liberty National WL vs Self Funding
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26. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
Liberty National Whole Life
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27. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
Liberty National Whole Life
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28. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
A BETTER PLAN CONTINUED…
“Sadly, over 70% of the life insurance policies sold today are cash value policies.
A cash value policy is an insurance product that packages insurance and
savings together. “
“Do not invest money in life insurance; the returns are horrible.”
“Your insurance person will show you wonderful projections,
but none of these policies perform as projected.”
Dave Ramsey – “The Truth About Life Insurance”
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29. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
BUFFET SPEAKS…
“Berkshire purchases life insurance policies from individuals and corporations who would otherwise surrender them for cash.”
“…We pay any premiums that become due and ultimately – when the original holder dies – collect the face value of the policies.”
“The original policyholder is usually in good health… the price we pay for it is always well above its (“CSV”)…”
“During 2004, we recorded net “losses” from the purchase of policies …totaling $207 million…”
“…When the proceeds from these policies are received in the future, we will record as realized investment gain the excess over the then-CSV….”
Warren Buffett Berkshire Hathaway 2004 Annual Report page 22
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30. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
IDEA #1…INSURING A MORTGAGE LIABILITY
Mr. Freddie Mac (A45, Std. NT) is purchasing a home with a $330k mortgage that he intends to carry for 30 years at an interest rate of 4%. He currently has sufficient insurance to meet his other obligations according to the SNAP and is exploring options to offset the mortgage liability. He has also heard that selecting a 15 year mortgage may be a better way to go but the payments do not fit within his monthly budget.
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31. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
IDEA #1…INSURING A MORTGAGE LIABILITY
$330,000 Mortgage Facts
Mortgage Term
Interest Rate
Monthly Payment
Balance in 15 Years
Balance in 30 Years
15 Years
3.5%
$2,400 $0
30 Years
4.0%
$1,575
$213,000
= $825 + Insurance Cost
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32. Year
Principal Paid
Principal Remaining 23
$214,739.71
$115,260.29

33. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
IDEA #1…INSURING A MORTGAGE LIABILITY
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34. Cumulative Premium Paid ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
IDEA #1…INSURING A MORTGAGE LIABILITY
At End of Policy Year 23
End of Policy Year 23 Freddie uses CV to pay off the remaining mortgage balance of $115, & pockets $5,285. Net cost of coverage for QWL <$4k for 23 years of coverage.
Years
Monthly Premium
Cumulative Premium Paid
Policy Cash Value
1 thru 23
$450.48/mo
$124,332.48
$120,545.70
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35. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
IDEA #2…COLLEGE PROTECTION
Mr. Ed Coverdell (A26, Std. NT) and his wife have a 1 year old child and are concerned that if something were to happen to Ed that their child would be unable to attend college. They recently started up a 529 plan but are concerned that they do not have enough insurance in place to cover their child’s education. After taking them through a CNA you come up with a Life Insurance Need of $250k to cover the liability.
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36. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
IDEA #2…COLLEGE PROTECTION
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37. At End of Policy Year 21 IDEA #2…COLLEGE PROTECTION
At the end of Policy Year 21 the Coverdells have covered the college education need and now have a couple of options:
Use the Cash Value to offset a portion of college costs.
Choose a Reduced Paid-Up Policy with a DB of $147,500.
Years
Monthly Premium
Cumulative Premium Paid
Policy Cash Value
Reduced Paid-Up Insurance
1 thru 21
$131.11/mo
$33,039.72
$36,065.00
$147,500
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38. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
IDEA #3…UTILIZING LEVEL TERM RIDERS ON WL
Trans Premier QWL
Liberty National WL
Client
Active Duty Male Age 25
Base Policy
$100k with $100k OPAI & WP Riders
$100k with $50k OPAI, $250k LT 15 & WP Riders
Monthly Premium
$70.51
$83.17
Advantages
Lower Initial Premium
Military Non-Med Limits up to $350,000
$100k contingent options vs $50k
Higher Initial Coverage
Term Rider can be partially converted at any age vs intervals on OPAI
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39. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
IDEA #3…UTILIZING LEVEL TERM RIDERS ON WL
Trans Premier QWL
Liberty National WL
Monthly Premium
Total Coverage
Age 25
$70.51
$100k
$83.17
$350k
($100k Perm / $250k Term)
Age 28
$136.77
$200k
$151.09
$400k
($200k Perm / $200k Term)
Age 31
$212.03
$300k
$228.01
$450k
($300k Perm / $150k Term)
Age 34
$297.87
$314.19
$500k
($400k Perm / $100k Term)
Age 37
$397.71
$412.69
$550k
($500k Perm / $50k Term)
Age 40
$513.30
$600k
$527.11
($600k Perm)
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40. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
DON’T LOSE TO PAR PRODUCTS!
Par products pay dividends which create paid-up additions. PUA’s increase the Death Benefit over time.
PUA’s are used to “short-pay” a Whole Life policy. PUA’s are surrendered to do an RPU on the base policy.
The Non-Par way is must cleaner and often less costly!
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41. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
IDEA #4: UTILIZING THE FULLY PAID-UP OPTION ON WL
New Client (Male) has existing Northwestern Mutual Participating WL Policy issued in 2009 (Age 23):
$105,521 Current Death Benefit
$ monthly premium Age 65
$2, Current Cash Value
Waiver of Premium Rider
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42. ADVISOR USE ONLY / NOT FOR USE WITH THE PUBLIC
IDEA #4: UTILIZING THE FULLY PAID-UP OPTION ON WL
Use 2 Transamerica Premier QWL policies:
Policy #1: Buy $153,345 DB with $100k OPAI & Waiver of Premium Riders for $102.92/month (same as NWM)
Policy #2: Buy $18,250 $ annually and pay 1st years premium ($213.34) & FPUO ($2,325.04) with CV from NWM policy.
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43. IDEA #4: UTILIZING THE FULLY PAID-UP OPTION ON WL
Northwestern Mutual WL
Trans Premier Totals
(2 policies)
Monthly Premium
$102.92
Current Death Benefit
$105,521
$171,595
Paid-Up Age 65
$100,000
$147,060
Gtd. Age 65
$53,814
$61,460 + FPUO Policy Cash Value
Additional Guaranteed Insurability?
None
$400,000 + Contingent, Marriage & Stork Options
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44. Whole Life Cheat Sheet Category Transamerica Premier QWL
Liberty National WL
Issue Age
Current/Last
UW Classes
Male & Female NT/T (Ages 16-65)
Juvenile (Age 0-15)
Std. NT Best Class
Sub. Std. up to Table 16
Male & Female NT/T (Ages 16-70)
Pref. NT Best Class
OPAI
OPAI (All Ages up to Age 37)
Max Units Ages 0-15 = 100 (5-1)
Max Units Ages 16+ = 100 (1-1)
Min Units = 5
Issue Ages: 0-37
OPAI Dates: 22,25,28,31,34,37,40
Add. OPAI Dates: 43,46, 49
@ 43 must have taken ½ of previous OPAIs (5 units count as OPAI taken)
@ 46 must have taken Age 43 OPAI
@ 49 must have taken 43 & 46 OPAIs
Stork & Marriage Options
OPAI (All Ages up to Age 39)
Max Units Ages 0-15 = 50 if <$50k, 100 if $50k or more in DB
Issue Ages: 0-39
@ 43 must have taken ½ of previous OPAIs (& no less than 2).
Stork , Marriage & Separation of Service Options
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45. Whole Life Cheat Sheet Category Transamerica Premier QWL
Liberty National WL
Term Rider
Decreasing Term Rider
Conversion up to Age 60
80% under 50/ 100% over 50
7 YR Term Rider (LP or LB)
Issue Ages terminates on anniversary following 65th birthday.
Can be added to existing policy of $25k+.
Minimum $25,000
15 & 20 Year Term Riders
Issue Ages 15yr: (20-65); 20yr: (20-60)
Minimum $100,000
Active Duty Military
Orders to deploy anywhere accepted (subject to change)
Orders to deploy accepted (subject to change)
App on Foreign Soil
Yes but Case by Case Only (contact CompEdge)
Yes but case by case (Contact CompEdge)
Active Duty Military Non-Med Limits
0-18 Up to $99,999
19-29 Up to $350,000
30-35 Up to $300,000
36-40 Up to $250,000
41-49 Up to $199,999
50-59 Up to $99,999
60+ Up to $49,999
0-30 Up to $200,000
31-35 Up to $200,000
36-40 Up to $125,000
41-45 Up to $75,000
46-50 Up to $50,000
51-60 Up to $25,000
Civilian Non-Med Limits
0-59 Up to $99,999
0-30 Up to $150,000
31-35 Up to $100,000
36-40 Up to $50,000
41-45 Up to $25,000
46-60 Up to $15,000
Elected Paid-Up Option
Yes, see Guaranteed Values Calculator (FPUO). No
Non-Forfeiture Options
Cash Value
Extended Term
Reduced Paid-Up
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