The Visible Policy
Page 1, Motivations
The Visible Policy
exists to accomplish several goals.
- Describe How my Policy Works
Whole Life insurance policies are complex. I have spent a lot of time
searching the net, and there seems to be no site that explains the details.
Company sites are run by their marketing department -- since actual
details might confuse you, there aren't any.
Other sites are full of generalities, platitudes, opinions, advertising,
and\or attitude. Except for the ads, I have those too.
.. plus lots and lots of details ..
- Never give a platitude with attitude unless you can back it up!
- This is a description of my policy only.
not know how it compares with other participating policies
from New York Life, much less from other companies.
Any similarity between what I have and what you have or are
considering may be purely coincidental. Still, it is
likely that the actuaries deep in the NYL vaults think a lot
like their counterparts at other companies. And they
are all bound by the same statistical laws.
- There is good insurance information on the web.
Here are links to information that may be more
useful to you than mine.
- Compare my Policy with a "Buy Term and Invest the Difference" Strategy
I don't believe there is a single life insurance site on the web which
doesn't address this issue. My general answer to
"Should I buy permanent or term life insurance?" is
"How the heck should I know?". At least you will be able
to see an apples-to-apples comparison; maybe this can help
you decide for yourself.
- Share my Model
I have constructed a reverse-engineered model of my policy.
It is in the form of a
If you really want to check my work or would like to modify the
model for the specifics of your policy, go for it. Just
remember that it might not be right. It is built from the
outside looking in, with very few details known of what is
- Encourage Insurance Companies to Provide Interactive Policy Models
If I do a credible job explaining things from the outside,
imagine what the company itself could do. They are the ones
who know how their products are truly structured. I have to calculate,
ignore, or sometimes guess at details such as commissions, fees, and cost
of insurance. Darn-it, marketing, give some pages to your
actuaries, and tell them to have fun!
- Encourage other Web-Savvy Policy-Holders to Share their Policy Info
Get with it guys and gals. I know I'm not the only person in the
world who can do this. (Maybe the only one dumb enough to try...)
Questions and Answers
These are not exactly "frequently asked questions". Until
you-all start asking things, please settle for these questions
- "What makes you qualified to do this?"
Well, ok, I was good with story problems in grade school.
My father was an accountant. I've seen people talk about
life insurance on TV. ...
Seriously, I'm just a computer programmer
with a background in graphics, embedded software, and graphical
user interfaces. When I bought my policy, it was a mystery
begging to be taken apart and understood. I've done
my best, but only the actuaries deep in some dungeon at the New York Life
Building will be able to determine how good my analysis is.
New York Life
- "Rich, how do you earn money from this site?"
Um, I don't. I pay for the web space and put in my own
time to author The Visible Policy. So it
costs me money; it does not earn any. (Now you know I am
not a qualified financial expert! ;)
- "Rich, can you help me decide ... ?"
No! I don't know
anything about your circumstances, nor do I have the time to
do special analysis for strangers. Sorry.
Insurance agents and fee-only financial consultants are trained
and licensed (and get paid) to help you make financial choices.
Be careful with your money, get outside opinions from friends
and family, then do what makes sense. The fact
that you are reading this shows that you are doing some
research on your own. Keep up the good work.
- "Rich, can you provide the spreadsheet in Microsoft Excel ® format?"
No. I am not licensed to use Excel nor distribute documents
in its proprietary format. The
spreadsheet uses a non-proprietary format which anyone is free
to use as they wish. I am a strong believer that the web
should be 100% open, and totally free of proprietary limitations.
OpenOffice.org is perfectly capable of loading and saving
Excel spreadsheets, but I cannot know if you are a licensed
Excel user. Hopefully Microsoft will adopt open standards
and support the OpenOffice.org spreadsheet format. If not, and you
actually have a licensed copy of Excel, ask Microsoft to support
the OpenOffice.org file formats.
- OpenOffice.org ® is free and currently available for the various
32-bit flavors of msWindows, as well as UNIX and Linux.
A Macintosh version should be available soon. If you are
a programmer and want the source code, it is available at
- Microsoft Office ® costs hundreds of dollars. Um,
did you say something about wanting financial advice... ?
- "(What a nerd!)
I guess you don't want any feedback then, right?"
Actually I'd love to get
ideas, money, etc. are all welcome.
If there is enough interest, I may even add a bulletin board to this
site. (You're not the only one
who can whisper, buddy.)
Rich, your site is boring."
That is not a question! So I get to ask you one.
Could we compromise on the phrase, "extraordinarily plain"?
- "Rich, do you gotta be so complicated?"
Sorry; I try to explain clearly and thouroughly, and sometimes -|
Fred the Actuary interrupts: Rich, I'll
handle this one. Complicated? That's funny.
Here is complicated, a little tidbit from one of my first year courses on
You don't even want to know what we went through the second year.
If you ever found out, we'd have to recruit you.
Uh, thanks, Fred.
- "Rich, why do you have so much text per line?"
You control how much text per line, not me! Make your
- "Is permanent life insurance a financial investment?"
Uh-oh -- Now insurance commissioners in 20 states know that
I am unqualified to do this. They tend to frown on anyone
using "life insurance" and "investment" in the same sentence without
the word "not" in-between. Fortunately for me, my only
connection with insurance companies is ownership of a policy.
I am not trying to sell anyone anything. I am not recommending
purchase of anything.
- "Can one use a whole life policy to 'be your own banker'?"
Yes, it can work well. It is certainly not for everyone, though.
Basically it involves taking disciplined policy loan(s), making sure to
at least pay the premium and interest annually so your policy does not actually
lose value. Eventually, you will pay back the principle as well.
Do an internet search for "be your own banker" if the idea intrigues you.
It does not really intrigue me.
Here is a list of items I would consider before doing it.
It is worth mentioning that someone smart, disciplined, and financially stable
has many good options. Being their own banker is only one of them.
- Is my income secure, and do I have other sources of cash for emergencies?
One can have his policy significantly gutted if he is unable to make the
interest payments for several years. The policy could even lapse,
reversing into tax liabilities any tax advantages this process may have had.
- Does paying interest to a bank really bother me that much?
Proponents love the fact that they are "paying themselves back" instead of
feeding greedy bankers. Me? "Meh."
- Is my policy from a conservative mutual life insurance company?
Well, yes it is. The company's earnings need not be split between
policyholders and stockholders. They are not likely to run into
financial difficulties due to short-term decision making and/or outright
stupidity. (Did you notice that the mutual life insurance companies
were barely phased by the 2008 "financial meltdown"?)
- Is the economy undergoing a period of high inflation?
Believe it or not, this is the time I would seriously consider taking
out a policy loan. As the economy underwent the Nixon/Ford/Carter
years of high inflation, many folks with participating whole life policies
were able to take out policy loans at 4% or 5%, and invest it into a
CD at 10% to 12%. I could certainly see myself being my own banker
with that kind of deal. (Modern insurance policies have
higher loan interest rates; I am sure the companies did not like
seeing much of their reserves end up in banks and credit unions.
It might still work, though -- just not as dramatically well.)
The following pages compare five different strategies relating to
life insurance. For compactness, each chart abbreviates the strategy
name as described below. The charts were generated by an
- Minimum Term+Invest ("min T+I") Strategy
The first law of a life insurance site is compare permanent
insurance to a "Term+Invest" methodology. Permanent insurance
is generally much more expensive than term insurance. So,
if you bought term insurance and invested the extra money yourself,
which would be "better"? I put better in quotes
because there are so many variables as to make the question
impossible to answer in a general way. At least this site
has numbers and details.
The word minimum means minimum out of pocket compared to
the other Term+Invest strategy (5). This is the same amount of
out of pocket cash used in next strategy.
- Base Whole Life ("WL" or "WL Base") Strategy
This begins as New York Life's policy illustration provided by
my agent. The "illustration" consists of long columns
of numbers printed out on paper. These were copied into
the spreadsheet. A lot of additional columns were added to
those provided. I attempt to deduce what is really going
on, and other columns allow comparison with the other strategies.
- Whole Life with Option-to-Purchase ("WL w/OPP") Strategy
My actual strategy has me "paying ahead", ie, I am sending more
money than I need to, beginning the very first year. My policy
allows this under its "OPP" rider (Option to Purchase Paid-up
additions, described in more detail later). Overall, I
plan to spend about 50% more than my policy illustration
predicts is necessary.
- Whole Life with Extra Payments ("WL w/XP") Strategy
The first 12 years of this strategy are exactly the same as
#2. However, out-of-pocket premium payments are
made for several more years. Premiums are due for the
life of the policy, but NYL's policy illustration projects that
it might become self-supporting after 12 years. That is,
dividends and already accumulated extra value are used to pay
the premiums. But what would happen if a policy holder
decided to pay the premium himself for a few more years, even
though it is not actually necessary? The total amount invested
in this strategy is the same as OPP, but "back-loaded".
Extra money does not go into the policy until after 12 years are up.
- maximum Term+Invest ("max T+I") Strategy
This is similar to the minimum T+I strategy, but with the
same extra amount of out of pocket money as the OPP strategy.
Like WL w/OPP, these payments are "front-loaded" to get more
money invested sooner.
When referring to the mathematical aspects of a strategy,
I use the term model. Technically, the spreadsheet "models"
these strategies based on input data and formulas I provide.
If the source data is incorrect, or I use the wrong formulas,
then the model is flawed. Any conclusions made by a flawed
model about a given strategy are obviously highly suspect.
My actual spreadsheet is available for download so that other
people can check my work. Also, being a spreadsheet, people
can alter the models to do various "what if" scenarios.
Tips and Style
I have tried to make this site easy to use and consistent in style.
It covers a complex topic in an in-depth manner -- that is my only
defense. You are the final judge of how good of a job I have done.
Please be merciful! Here is an overview of features meant to
make using this site a bit easier.
- Navigation links are at the top and bottom of each page.
- Charts pop open into a smaller stand-alone window.
I might spend 10 inches of text talking about one chart.
So the chart is way up there while you are reading
way down here. To let you see the image
at the same time you are reading the description, click on it.
A second smaller window will open up. You can position this
as necessary while you read. It can also be resized.
(I use PNG images
for all my charts; both Internet Explorer and Netscape have supported
this advanced image type since the 4.1 versions. Some IE users may have
a bit of a problem. There are versions which don't know that
they support PNG, even though they actually do. The browser won't
open PNG images, but will display them if part of a web page.
(I'm not making this up!) If you
have this problem, either upgrade your IE or use Netscape.)
- Most topics are discussed in an outline form.
Indenting is used to indicate the scope of the current subject.
You should be able to skim through this site by just reading the
topic lines. I know I tend to be wordy. This is your
- I attempt to use a humorous style.
Unfortunately for you, this is the only sense of humor I have.
Accesses since 6 June 2002
last modified 22 November 2010
© 2002 - 2010 by Rich Franzen
Rich's Home Page
No content within The Visible Policy has been approved,
authorized, or verified by New York Life or any of its representatives.
I have attempted to fairly and accurately portray the policy, but there are
likely to be mistakes. Over time, I shall endeavor to correct any
misinformation found herein.|