If you stroll down Madison Ave on the lower-ish Midtown Manhattan side you'll come to 51 Madison Ave, the gold-crowned home office of one of the largest and oldest United States Life Insurers, New York Life. And if you called upon that company to discuss your life insurance needs, you'd no doubt get an ear full about the benefits of owning whole life insurance.
Today we're going to discuss one of New York Life's whole life products in particular AD108, or as it's known by it's agents: not the custom product.
Facts and Figures
On its face, New York Life seems like an impressive package. A non-direct recognition company, with a 3.5% paid-up additions load issued by a company with lots of assets, triple A ratings, and lots and lots of years of experience. Founded in 1845, New York Life began writing insurance contracts a little more than 15 years prior to the War of Northern Aggression (let's see who get's that one), so they have plenty of record to run on.
The contract is paid up at age 100 and endows at age 120. Available riders include:
- Waiver of Premium with a two year own-occ definition of disability
- Accelerated Death Benefit paying for Terminal Illnesses only and capped at $250,000
- Guaranteed Insurability with up to 9 option dates each up to a maximum of $150,000 per ex. date
- An additional Annually Renewable Term rider to increase total death benefit on the cheap (lasts for 10 years, and does slightly increase Modified Endowment Limits)
- A child term rider (boo! Just buy a juvenile policy already)
- A guaranteed insurability spousal/partner rider that allows a person to use death benefit proceeds to purchase life insurance on him or herself guaranteed issued upon your passing
- A change of insured rider for COLI purposes
- Upromise rider (really useless, and nothing more than a marketing ploy)
This will be a recurring theme on our whole life reviews as blending is a crucial aspect to what we do. And when it comes to blending at New York Life, they allegedly aren't doing that badly. I say allegedly because I'm afraid to say no one really knows exactly what New York Life can do with respect to blending.
You see, there's what's on paper, which according to New York Life itself looks pretty good: a minimum of $25,000 base whole life with no stated maximum on the term, though we suspect at some point underwriting would cut us off. However none of New York Life's agents, and certainly none of the 5 people working in external brokerage, understand how to design a policy to maximize blending. The PUA rider (also known within NYL circles as the OPP Rider–Option to Purchase Participating insurance, some such thing) is not a flexible rider, so the whole idea sort of dies with that notion.
If Alpha is the metric that hedge funds live and die by, dividends are the metric whole life focused companies life and die by. And New York Life isn't working too hard to win this race. They have one of the lowest dividend interest rates in the industry (not that one can truly compare stated dividend interest rates from one company to another) and the last time the company increased it's dividend interest rate Jimmy Carter was in office. Actually the increased it once by 15 bps in 1997 and left it there for 4 years and then proceeded to chop it down 179 bps between then and now. This fledgling dividend rate has impacted their projected and actual cash value performance within their policies in a big way. Even their career agents have admitted from time to time New York Life is not the company people go to when looking for cash performance.
But does this matter?
It is Life Insurance After all
New York Life isn't hiding from the notion that they are a life insurance company. They believe strongly in life insurance for life insurance sake. There's nothing deplorable about that. Though having a whole life product that isn't aggressively focused on crushing other companies and other asset classes in terms of rate of return is a little strange, to each his own.
New York Life has always had a decent reputation regarding underwriting practices. Though data they've released to Blease would suggest the underwriting department is staffed by people who don't know New York Life has anything higher than a standard non-smoker risk class. I'm guessing this is more a function of the company's career sales force to sell small policies that don't qualify for anything higher than standard non-smoker. NYL will not issue newly placed stand alone whole life policies under $100,000 in death benefit at any higher risk class than standard non-smoker.
Being a large company give them a certain preference for large case situations. With an internal retention of $40,000,000 in death benefit, New York Life can manage a lot of risk for one individual. And unless you're a career agent, you'll need to make use of this large asset high retention fact, as they won't accept any case from a non-career agent that isn't at least $20,000 in annual premium (or at least that's the prevailing number at the moment, it does have a tendency to bounce around a bit depending on whom you speak with). This policy is used to avoid competition between career agents and outside brokers using NYL's policies, or at least that's what they claim.
Minimum case size is $25,000 in death benefit or at least $480 in annual premium. Again, unless you are a career agent, that fact isn't going to matter much to the agents and brokers out there. For individuals looking for a small whole life policy, NYL may not be a bad choice, as they tend to major in this topic.
There's no denying the quality New York Life brings to the table. This whole life contract is solid and an agreeable fit for the right circumstance (death benefit only focus, dividends and cash value are a happy bonus you weren't expecting, and that's a good expectation to have). Still, I can't help but feel as though there are better contracts out there from other companies that would be even more value for the permanent death benefit focused consumer. Still, there are those who marvel over the financial ratings, the assets under management size, and the gold cap on the home office (I've been told managing partners get a piece of the crown, kind of makes me think of the Aggro Crag). A plain whole life policy, used for plain whole life needs. With a name like New York Life, you might expect a certain degree of just so-so.