Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews

When a Settlement Planner Turns Life Insurance Salesman and Misses Important Details

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Trial lawyers on their mailing list recently received Milestone Consulting's FeeMaster attorney fee deferral brochure.  FeeMaster Option 2 is a cheap and deceptive sales pitch to buy permanent whole life insurance.

The Milestone sales pitch is this:  "Keep more of your total contingency fee and work within an existing financial framework that can return historical dividends as high as 6% or greater. This is a long-term wealth accumulation strategy that significantly outperforms fixed annuity returns and is designed with certain attorneys in mind".

12-2018 footnotes the 6% says its based on illustrations and not guaranteed

2020 Milestone FeeMaster sales pitch omits the footnote

"The most groundbreaking option relies on one of the greatest existing wealth accumulation tools—permanent whole life insurance. By becoming a policy holder in one of these large mutual, you reap the benefits of their financial strength and dividend-paying histories".

But that's not the shocking part. This Milestone Consulting  page header from the FeeMaster brochure, is a classic case of baffling them with this bullshit:  "Where else have you seen historical dividends of 6% or greater?".  Well I'll answer the question because I have!

I've been in the life insurance world for 37 years in May. I started my insurance career with Northwestern Mutual, which is one of the leading mutual insurance companies in the United States. I have held the professional designation of Chartered Life Underwriter (CLU) for 30 years and Chartered Financial Consultant (ChFC) for 29 years. I am an owner of whole life policies that I bought in my 20s when dividend interest rates exceeded 11%.  Portfolio vs new money investments have had a role in keeping dividend rates higher than those policies crediting new money based rates on their policies, but portfolio rates have declined. Long term bonds at higher rates are maturing and rates cannot be reinvested at the same rates. This has been a phenomenon all across the board. Historical Whole Life Dividend Rates 2020 by Top Whole Life proves the point.

That being said, focusing on the historical dividend rate as Buffalo based Milestone Consulting is doing, without accounting for the costs, and projecting that rate or greater  is misleading at best. Actual policy performance is important and you will also find that performance was different historically. Actual performance will also be different for different underwriting classes.

Here is what Northwestern Mutual says about its dividend interest rate

"In regard to Northwestern Mutual's dividend payout and dividend interest rate (DIR), comments in this document pertain generally to life insurance policy dividends.

The company's DIR for unborrowed funds for most whole life insurance policies reflects the investment performance of the applicable managed assets net of taxes and any contribution to surplus. This rate is used for the determination of the interest component of a policy's dividend. The rate is applied to unborrowed funds for most whole life insurance policies after mortality and expense charges have been deducted from policy values. Depending on the terms of a particular policy, a different rate may be applied. For example, either a different rate is credited on borrowed funds to reflect individual policy loan activity, or all funds, both borrowed and unborrowed, are credited with a single rate that reflects the average level of borrowing for all similar policies. 

The DIR is not the rate of return on a policy and is only one factor for determining the life insurance dividend. The majority of our life insurance dividend payment is a result of our industry-leading persistency, favorable mortality costs and diligent expense management. Decisions with respect to the determination and allocation of divisible surplus are left to the discretion and sound business judgment of the company's Board of Trustees. There is no guaranteed specific method or formula for the determination or allocation of divisible surplus. Accordingly, the company's approach is subject to change. Neither the existence nor the amount of a dividend is guaranteed on any policy in any given policy year. Some policies may not receive any dividends in a particular year or years even while other policies receive dividends".

MassMutual, the life insurance company believed to be used with Milestone FeeMaster Option 2,   states in a November 4, 2019 press release announcing its 2020 dividend scale

"The dividend and dividend interest rate (DIR) are determined annually, subject to change and are not guaranteed. Dividends for eligible participating life insurance policies primarily consist of investment, mortality and expense components. The DIR is used to determine the investment component of the dividend. It is not the rate of return on the policy and should not be the sole basis for comparing insurers or policy performance.Dividends are not guaranteed and will vary over time. As a result, the income payments that you receive may be more or less than the dividends that were illustrated when you bought your policy".   Despite this statement by MassMutual, Milestone Consulting wants to "leverage the history".

But both Northwestern Mutual and Mass Mutual have paid dividends since the 19th Century.  Both companies have experienced declining dividends over the last 20 years.

"Gain access to cash without triggering taxation through traditional policy loans".

• You can access cash value without triggering taxation through traditional policy loans, but Milestone fails to account for the impact of loans on the actual policy performance.
• If you borrow too much from a whole life policy and the policy lapses due to non payment of premium or otherwise lapses, there is a taxable event if the outstanding loan exceeds your cost basis.

"The short-term internal rate of return yields are low, but contract years 11-20 credit at greater than 6%"  

The December 2018 upload of a prior rendition of the Milestone Consulting brochure, contained the disclosure and said the 6% was based on 2013 market trends, but the new one doesn't.  If known, I doubt this would ever get past any life insurer's or regulatory compliance.  One wonders if any client is shown an illustration of what happens if the dividend scale is reduced.

Here's what MassMutual actually says in footnote tpa November 4, 2019 press release announcing its 2020 dividend scale:

^"1 The dividend and dividend interest rate (DIR) are determined annually, subject to change and are not guaranteed. Dividends for eligible participating life insurance policies primarily consist of investment, mortality and expense components. The DIR is used to determine the investment component of the dividend. It is not the rate of return on the policy and should not be the sole basis for comparing insurers or policy performance".

"Unrivaled" , " A home run for a select few"  " The most groundbreaking option" are superlatives used by Milestone to would-be FeeMasters

The quintessential Woody Allen nightmare?

Pacific Life Insurance Company Gets Upgraded by Standard & Poors

by John Darer CLU ChFC MSSC RSP CLTC

Pacific Life Insurance Company has seen saw an upgrade of its financial stability ratings from A+ to AA- Standard & Poors is welcome news at a time of world uncertainty.

Pacific Life, a major structured settlement annuity issuer gets upgraded by Standard & Poors July 2016

Structured settlement annuities, such as those issued by Pacific Life Insurance Company and Pacific Life & Annuity Company, provide stable core income that people can depend on for a fixed period of time or for an income that cannot be outlived. 

Structured settlements are a customized series of payments negotiated as part of the consideration for settlement of legal claims by parties in litigation.

Pacific Life has been in the insurance business for a long time and is one of 5 life insurance companies writing structured settlement annuities that have been in business since the 1800s!

It's possible that your great grand parents or great great grandparents owned Pacific Life products (or Pacific Mutual as it was known back then).  Visit The Structured Settlement Annuity Museum that displays among its exhibits, a 1900's era Rehberger metal ink well fashioned into the Pacific Mutual Life building in Chicago and the photos of the original 1868 logo.

Pacific Life Insurance Company, which is rated A+ by A.M. Best, issues structured settlement annuities in all states except New York, where annuities are issued by Pacific Life and Annuity Company. Pacific Life also issues a non qualified post settlement annuity. In 2014, Pacific Life introduced its Index Linked Annuity Payment Adjustment Rider (ILAPA).

Favorable Life Insurance Rates for Non-Cigarette Smokers

by John Darer® CLU ChFC CSSC RSP CLTC

There are several life insurance companies that will allow non-smoker rates for users of cigars, pipes, chewing tobacco, nicotine gum, lozenges and e-cigarettes, even with nicotine in the urine.   In order to qualify you will still need to be a non-cigarette smoker for at least 12 months.

You will still need to complete the normal underwriting process and other risk factors could impact your cost of insurance or whether or not you are insurable.

 

Occasional cigar with buddies OK

 

 

 

Life Insurance for People Who Hate Needles

by John Darer CLU ChFC CSSC RSP CLTC

Getting life insurance can be a pain for some who are afraid of a "little prick".  Well at least 4 life insurance companies have gone "jab-er walkies" and permit you to buy life insurance without having to raid your veins for homespun "tomato juice" OR even requiring a urine specimen.

  The eligible face amounts for the life insurance depend on the company but range from $50,000 up to $1,000,000, with the median at $500,000.  Despite relaxed requirements on blood draw and urine specimens,  the subject insurers will still need to review attending physicians statements and pull a motor vehicle report.  If you need a life insurance quote or want more information please call me at 203-325-8640.

Don't worry I'm a phlebotomist!

 

 

Structured Settlement Annuities Are Issued by The Biggest Issuers of Life Insurance

by John Darer CLU ChFC MSSC RSP CLTC

Structured settlement annuities are issued by some of the oldest and largest life insurance companies in the United States.  Many companies that issue these annuities are also among the biggest issuers of life insurance. 

The following shows where these current and former issuers rank in the top 25 total life business issued in 2013  (as measured by A.M.Best in its September 2014 issue).

Metropolitan Life    1

Prudential of America Group 3

New York Life Group 6

*AETNA Life Group 11

*Aegon Group 14

*Voya Financial Group  (formerly ING)  16

AIG Life Group  18

*Hartford Life Group  19

*Mass Mutual  20

Mutual of Omaha Group  21

* former issuer of structured settlement annuities.

Other leading structured settlement annuity issuers, such as Berkshire Hathaway Life of Nebraska, First Berkshhire Life, Pacific Life Insurance Company and Liberty Life Assurance Company of Boston are part of large insurance groups.

Term Insurance Available As Late as Age 85, if Insurable | 203-325-8640

by John Darer® CLU ChFC MSSC RSP CLTC

You may not be aware that it is possible to buy term life insurance up to age 85.  Level premium terms of 5, 7,10,15 and 20 years are all available to those who are insurable.

• Term insurance plans that are expiring can be renewed beyond age 85 depending on the company.
• Underinsured insurable seniors with ability to pay, or with children or trusts with the ability to pay, premiums can take steps to fill the coverage gap.

 

 

 

Breast Cancer and Availability of Life Insurance

by John Darer® CLU ChFC MSSC CeFT RSP CLTC

Nearly one in eight U.S. women develops breast cancer at some time in their lives.  Men are not immune from the disease, as one of my high school classmates, a survivor, can attest. 

Whether you are a young mother or father with a need to protect your children and your family, or you have an estate planning need, to protect your wealth,  or a special needs child or adult, a history of breast cancer diagnosis is not an automatic decline for life insurance.

Breast Cancer Stages and Life Insurance Underwriting

• Most Stage 0 and many stage 1 breast cancers can be considered at standard rates after treatment.
• Most Stage 2 breast cancers can be considered one to two years after treatment, usually with a temporary flat extra rating.
• Stage 3 and 4 usually require a postpone period of three to five years before any coverage can be offered.

Background

The underwriting on breast cancer is primarily based on the Stage, 0 to 4. Stages 0 to 2A are considered localized just to the breast, where as Stages 2B to 4 are more advanced and usually have lymph node involvement or metastasis to other areas.

Treatments of breast cancer usually involve surgery (lumpectomy or mastectomy) followed by radiation therapy and/or chemotherapy, depending on the severity of the cancer. Additional treatment advances have been made with earlier diagnosis and therapies, together with gene testing, hormones, etc.

 

I have 40 years of experience in life insurance. For more information and/or a consultation,

 

Please call John Darer at 888-325-8640 

 

Image source Cleo/Dreamstime

Last updated January 15, 2024

Life Insurance Contestability | The Insurance Company is Contesting The Claim

by John Darer® CLU ChFC CeFT® MSSC RSP CLTC

During the life insurance contestability period your life insurance company can cancel the coverage and return the premium if it discovers that information supplied by you (and/or the policy holder if you don't own the policy) on the insured application, or during the application process to qualify for the insurance, contains material misstatements. The general contestable period is usually the  one or two years, depending on the company.

The purpose of the contestability clause in your life insurance contract provides the company a reasonable opportunity during this period to protect itself against people obtaining insurance that would not have qualified for it if they gave truthful information on their application.

Some Constestable Clauses in Life Insurance Policies to Look Out For

Most life insurance policies have a suicide exclusion that specifically limits insurance company liability to a refund of premiums if the suicide occurs within a certain period of time.  In some states it is one year and other states, like California it is two years. The reason is obvious. 

Many contracts also have a clause regarding misstatement of age and gender. Depending on contract language, claim amounts may be adjusted based on the insured person's true age and gender. Other insurers may take a harder line and only permit a return of premium.

And the biggie...Misstatement of smoking status is mentioned as fraud in many life insurance contracts. As tempting as it may be for smokers when they see the  how consuming tobacco or weed affects cost, don't even think about lying about smoking.Coverage is immediately voided with no claim payable. The insurer may only refund premiums paid after the date tobacco-use misrepresentation is discovered. There is plenty of case law out there to support the insurers. You are buying life insurance to protect against unacceptable consequences to your family in the event of your death. Don't screw it up!

If your incur a loss during the contestable period expect a contestable review but don't panic, unless you've been untruthful.

Useful Resources

The Misrepresentation Defense in Life and Disability Insurance Cases: The Issue of Causation by C. Edward Sentell

Northwestern Mutual Life Insurance Company v Gil 2009 WL 276086 (Conn. 2009). Insured died in homicide, but had misstated about medical history when application was taken. NML refused to pay $15,000,000!

Contacts for State Insurance Departments can be found at the website of the National Association of Insurance Commissioners

Businesses and Family Continuity | If They Only Had Life Insurance

This video contains a brief discussion about the importance of life insurance to the continuation of businesses (including law firms),  the financial security and survival of families and the need for expert advice, featuring Stamford Connecticut based life insurance expert John Darer® , CLU ChFC MSSC RSP CLTC.

 

Working with Independent Insurance Agents and Brokers

by John Darer CLU ChFC MSSC CeFT RSP CLTC

An independent insurance agent and broker has the ability to provide the best product to fit a client’s unique needs since he or she is not contractually bound to sell only a primary company’s products. While captive agents do go "off the reservation", they often do so "on the QT", or only after the primary company has declined the risk.

Consumers may see a value in an agent who has a brand name on a business card, but they should be aware of the independent broker/consultant/planner model which enables someone with smarts, experience and confidence, to access and provide a wider universe of products and solutions to meet the consumer's needs than a captive agent.

A captive agent for life, disability, annuity or long-term care insurance is associated with the captive company by joining a general agency for the captive company. An independent agent and broker is affiliated with a master general agency (MGA or BGA) which pools production from a wide universe of producers This not only convenient for the agent, but it serves to work around minimum production standards, which could possibly have an effect on agent objectivity towards the end of the year.