The Visible Policy
Annex A1, Model This!

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If You Build It, They Will Sum

Money, sex, pictures, future events, past regrets — a complete mathematical model of a life insurance policy offers all of this and more.  Let me know if you find one.  For now, you will just have to settle for mine.  Hey, it's free.

Spreadsheet with 5 Models
OpenOffice Calc Document

This spreadsheet generated
all the charts you've seen here.
Except for the current chart.
OpenDocument Spreadsheet

It is newer and simpler, with no models.® is a full featured office application. It provides excellent import/export compatibility with Microsoft Word®, Excel®, and PowerPoint®.  It can also read Access@ files saved in ODBC format.  Additionally, is free!  It is available for Microsoft Windows®, Unix®, Linux®, and, MacOS X®.

The standard formats used by documents are in non-proprietary XML form.  Additionally they take up less disk space so web downloads are quicker. Your computer can have both Microsoft Office® and® installed at the same time.

Oracle has a commercial, supported, version of named Oracle Open Office ®.  It retails for about U$50 and comes with a manual and a few other goodies.  Obviously, my spreadsheet will work with it; I don't know when Microsoft will support the formats.

If needed, Get Logo

For the record, here are the source data and assumptions used to build the models:

Historical Note

My friend (and everyone else) thought the original model was too complex.  There were three ten-year term policies involved, starting cheap but ending up quite expensive for the final ten years.

The prices for those policies were not from real illustrations.  I had thought it would be easy to obtain cost-of-insurance data.  It was.  Too easy.  There must be at least 20 web-based term-quote services.  The problem is, that each quote service offers maybe 10 quotes for each age range, and the cost varies by at least a factor of three.  As Ricky says:

Man with one quote always know what to pay.
Man with 20 quotes ask wild donkey for advice.

-- Ricky's Fine Book of Confucianisms, 2nd Edition

Even though the policies were presumed to be renewable, the next tier of price in each case assumed a health check is made.  Guaranteed renewability can be a godsend if needed.  If you are healthy, though, getting the health check every 10 years would save a lot of money over the guaranteed premium.

Since my life insurance passes to my beneficiary tax-free, I believe a large degree of equivalence has been established within the models for comparison of my whole life policy with T+I strategies.  If distributions are withdrawn from any model, taxation is similar as well.  I.e., up to what was paid ("cost basis"), money withdrawn is not taxed.  Money withdrawn above cost basis is taxed as normal income.

I cannot state that the model is perfect.  Here are some known inequalities:

  1. Once transferred to the muni fund, the T+I earnings will not be taxed again. Policy earnings will eventually be directly taxed if I don't die first.
  2. Loans can be taken on the policy, but not the IRA. (If I die with an outstanding loan, the policy escapes taxes, but the loan will have been paying interest to the NYLIC.)
  3. The 15% tax rate during the BTID transfer is probably a little low. The 6.25% earnings rate on the muni fund may be a bit high. (Both are so far in the future, it is really hard to know what will end up to be reasonable.)
  4. Investment in a mutual fund involves an account owned by the investor.  With Whole Life, the account is owned by the policy.
  5. T+I allows the investor to control his investments at any risk level desired.  He can change his level of risk over time.  Whole Life cash value remains conservatively invested for the life of the policy.

Thanks to many on the "" newsgroup for providing invaluable feedback.  The primary discussions about my modeled strategies can be read at:

whole life comparison with BTID
please critique hypothesis re mutual bond fund

("BTID" is the common abbreviation for "T+I".  I did not know that when I started this site.)

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

Rich's Home Page

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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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Hmmm -- "sex pictures", "free", "female", "model" ...
An astute student of the web might
conclude I was trying to fool the
search engines.  It wasn't intentional!
I mean, if that had been my goal,
would I not have said "mp3" as well?
This is just actuarial science, pure and simple as the writhing snow.