The Visible Policy
Page 4, Let the Future End!

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Benefits of Death

We politely call them "Life Insurance Policies", understanding they really insure death, not life.  The Death Benefits may well have a very positive affect upon your surviving family members, but you are busy eating maggots. Or vice-versa... With these pleasantries aside, let us take a look down from Heaven and see what the policy might accomplish.
Death Benefit, age 42-89
You can click the above curve to get a smaller version in a separate window.  This will allow you to view the graph as you read my description below.  From the top-right to the bottom-right:

Strategy Comparisons

There is no one right methodology to use in comparing strategies.  This is particularly true in life insurance.  What is most important?

If you know how to use spreadsheets, mine is available for you to download and modify as desired.  Test the strategies which make sense to you.

Outliving Death

Fred the Actuary expects me to die about age 79.  But, being an actuary, he has a backup plan in the event I should live too long.
Death Benefit vs Cash Value, age 42-99
It is a simple plan, really.  Slowly force Cash Value and Death Benefit to converge, until, at age 100, they intersect.  The policy matures at that point, and I think they send you your money and maybe an engraved Certificate of Performance.

Starting again from the top right:

You may be wondering how hard it is to get the curves to converge like that.  It cannot be too hard, because most participating whole life policies are designed to do the same thing.  (The age at convergence won't necessarily be 100.  Some companies sell policies which mature at age 85, for example.)  The algorithm is simple.  Charge more.  At age 40, the price per $1000 of PUA is $297.  At age 80, it is $797.  You can see that Cash Value never stops going up.  One primary form of policy earnings are dividends; I don't have to re-invest those in the policy, but since I want it to be self-supporting eventually, I choose to do so.  At age 80, I should be earning a lot in dividends, but the amount of Paid Up Additional insurance it buys is not that much higher than it costs.  At age 98 it costs $972 per $1000.  Fred excuses this behavior because he says I have a higher chance of dieing at 98 than at 40.

The other primary form of earnings gain in my policy is "guaranteed value". It goes up over policy life.  Close your eyes and guess what the guaranteed value of my $100,000 policy is scheduled to be at age 100.
No, try again.  ...    ...
That's right!  $100,000 it is.  You can open your eyes now.

So the fundamental guaranteed value equals the face value of the policy at age 100.  And the cash worth of insurance bought in addition to face value equals its insurance value at age 100.  Convergence!

Fred is a pretty smart guy, and generally nice.  But one thing -- he can get real ugly if someone tries to cross his lines prematurely.  When I first built the above chart, the convergence was occurring around age 97.  I didn't pay a lot of attention, because it happened on the Base Policy case too (NYL's raw numbers).  Big Mistake.  Fred means it when he says 100 -- 97 is NOT "close enough".  ("People died for those 'lines'!")  The problem turned out to be that the chart was displaying end-of-year Cash Values, but beginning-of-year Death Benefits.  Special columns needed to be added to the spreadsheet for the beginning-of-year Cash Values.

Accesses since 31 May 2001
last modified 22 November 2010
2001 - 2010 by Rich Franzen
New model incorporated August 2002.

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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.
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