The Visible Policy
Page 8, State This!
Current Statement for My Policy
Here is my latest statement, issued at the end of the tenth policy year.
The
previous page
described the four policy "machines".
Can you discern a relationship between the machines and this statement?
Unofficial Reproduction of Annual Statement
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NEW YORK LIFE
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The Company You Keep ®
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New York Life Insurance Company
Annual Policy Summary
Policy Number: ## ### ###
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Insured: RICHARD W FRANZEN
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Date Prepared: May 10, 2010
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Life Insurance Death Benefit
as of May 10, 2010
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Policy Cash Value
as of May 10, 2010
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Base Plan Death Benefit
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$100,000.00
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Base Plan Guaranteed Cash Value
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$21,500
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Death Benefit of Optional Paid up Life
Insurance Rider (OPP)
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27,933.00
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Cash Value of Optional Paid up Life
Insurance Rider (OPP)
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13,409.80
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Death Benefit of Paid up Additional
Life Insurance purchased by Dividends
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19,573.00
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Cash Value of Paid up Additional Life
Insurance purchased by Dividends
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8,688.69
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Premiums paid beyond May 10, 2010
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1,764.00
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Premiums paid beyond May 10, 2010
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1,764.00
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TOTAL DEATH BENEFIT
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$149,270.00
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NET CASH VALUE
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$45,362.49
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Loan Summary
from May 12, 2009 to May 10, 2010
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Dividend Summary
as of May 10, 2010
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No activity during the period
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The 2010 DIVIDEND credited
to your policy
The dividend of $890.27 purchased
$2,009 of increased Death
Benefit Paid up Additional
Life Insurance
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$890.27
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Summary of Our Disbursements
from May 12, 2009 to May 10, 2010
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Summary of Your Payments
from May 12, 2009 to May 10, 2010
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No activity during the period
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Policy Premium
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$3,528.00
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Payment(s) for Optional Paid up
Insurance Rider (OPP) Premium
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472.00
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TOTAL PAYMENTS
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$4,00.00
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100% Unapproved -- No content within
The Visible Policy is authorized or verified by NYL
-- 100% Unapproved
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Premium, Dividend, and OPP Notes
Each statement represents a single instant of time. One second before
midnight on each policy anniversary date, a computer generates a record
representing the facts as they were then. A dividend, if any, is
credited, representing my ownership interest in NYLIC. Guaranteed
Cash Value is credited, in exact accordance with the terms of my policy.
Other updates are silently made, increasing cash value, also in accordance
with the terms of the policy. NYLIC seems to consider this money as too
hard to explain; the computer credits it to your account without reporting
why or where it came from.
Other kinds of updates vary from statement to statement. Has next year's
premium been paid yet? If so, add this amount to both the Total Death
Benefit and Net Cash Value. (Should I die or cancel the policy two
seconds past midnight, the whole premium would be refunded. As the year
progresses, more and more of the premium is devoured by the policy.) Has
PUA been purchased? If so, update the lines relating to OPP. If
there had been loan or disbursement activity during the year, this would
affect the statement in other ways.
Such variances and silences make comparing statements a somewhat complex
process. NYLIC has legal and accounting reasons to report the policy as
it was during that one second in time. Analytically, that instant has
too many variances. For The Visible Policy, I have
chosen to eliminate the variances by representing the policy as it will be two
seconds before midnight of the next policy year. Premium payments will
always have been made (and completely spent), OPP will have been purchased,
and, in general, activity from year to year becomes easy to compare.
My hope is that these "Activity Statements" will help illuminate the policy
machines. Admittedly, they are a bit harder to understand than NYLIC's
Policy Summaries. I cram more information into less area.
Once you try to compare statements from year to year, I think
you will find that the Activity Statements are in fact clearer. The
left and right links at the top of the table allow you to easily cycle
between activity statements. Those statements contain calculated values
discussed earlier, such as earned dividend rate and black box annual gain.
<:=- Last
Activity, Current Year (13 to 14)
First -=:>
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9 May 2010
| Payments
| Increase in Value
| Total to Date
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Base Death Benefit
| 1,764
24,696
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| 100,000
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OPP Death Benefit
| 236
10,904
| 490
| 27,456
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Dividend Death Benefit
| 890.27
| 2,009
| 19,573
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Total Death Benefit
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2,000
$35,600
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2,499
$47,029
| $147,029
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Guaranteed Cash Value
¹ 2,000 / 100,000 = 2.0%g
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| 2,000.00¹
| 21,500.00
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OPP Cash Value
² 357.76 / 27,456 = 1.30%g
| 228.92
10,569.66
| 357.76²
2,611.22
| 13,180.88
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Dividend Cash Value
³ 246.09 / 17,564 = 1.40%g
| 890.27
7,510.15
| 246.09³
1,178.54
| 8,688.69
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Total Cash Value to Date
| $18,079.81
| $25,289.76
| $43,369.57
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early payment of $2,000 carried forward to next activity summary
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10may09
$39,646.53
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The top half of the Activity Statement tracks Death Benefit, just as
does the first block of NYLIC's Policy Summary. Similarly, the bottom
half of my statement corresponds to the Cash Value block of NYLIC's
statement. I use colors to represent various kinds of values.
Red numbers are payments made out of my own pocket.
Green numbers are Death Benefit.
Black numbers are Cash Value.
Blue numbers are used to represent special quantities.
- Since I choose to keep my dividends within the policy, they simultaneously
act to increase cash value and to purchase more insurance. Yet they are
not an "out-of-pocket" expense. (Perhaps in this context they are an
example of a "not-into-pocket" gain.)
- The blue cash value total can be thought of as either last year's EoY
number, or this year's BoY number. I include it because it is useful for
various calculations, and it is just nice to see the two EoY numbers back-to-back.
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The black numbers in the "Payments" column purchase more insurance.
The black numbers in the "Increase in Value" column do not.
The latter numbers represent a special kind of earnings. Both NYLIC's
statement and mine specifically report Guaranteed Cash Value. However,
careful review of a single NYLIC statement would not reveal the other
earnings. To glean the existance of these pennies from heaven, you
have to carefully compare two consecutive NYLIC statements. I describe
this gain as "linear increase in value"; see the
PUA Cash Value section of the
previous page.