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I’ve been working through a tricky underwriting case with a client. He was initially declined by a few companies and then approved by American General at their highest rating. Not best rate, but highest, as in table 8. It was at this point that he called me. In reviewing how he got where he was he admitted that when the first decline came in he was so upset that he started applying in every direction he could. So even though he had the AIG approval he still had somewhere in the vicinity of eight life insurance applications pending.

What he didn’t, really couldn’t know was the quagmire that had created in MIB, the Medical Information Bureau. There was so much activity and redundant, unverified negative junk in there that I suspect some companies took a look at it and declined him because they just chose not to participate in the mess. I shopped it for him cautiously and once I had the best company for the job, we discussed strategy which included him withdrawing four of the applications that I knew, given the issues involved, were more likely to decline and muddy the waters even further, than approve. There has only been a few times in the last 16 years that I’ve recommended to a client to withdraw another application. On the face I’m sure it seems self serving getting a client to bail on the competition, but in rare cases there is a serious need to unclutter the playing field. I simply had him remove those companies that weren’t going to be players in the end anyway.

Now hold on. All this background just to rip the head off of a dirt bag whole life liar. Just a little bit more. This client is a doctor and as part of a legal agreement he had to carry a $1mm, 30 year term policy. He does have some mood disorder issues, but they got blown completely out of proportion. So, a little ways into underwriting he has been declined a few more times and had my application and one from Northwestern Mutual still pending. The approval from AIG had a premium of just over $25,800 a year. I knew that even if there was some bomb in his records I would come in under that at about $25,200.

So, the illustration from NWM for whole life showed an initial premium of $25,000 (way to sneak in just under the term approval!!) and an ongoing premium of $15,000. Then they approved him at standard plus and told him it was approved at $19,000 a year and that at the end of the 30 years he would have $262,000 in guaranteed cash value. He called to let me know last Friday and I asked him to fax me the approved illustration before we both took off for the holiday weekend.

I emailed him today and told him it didn’t appear to me that the premium and the death benefit were guaranteed to remain level. On the copy he sent me the of the Illustration the only thing guaranteed was that if he kept paying a non guaranteed premium for 25 years there was $262,000 in cash, about half of what he had paid in. The problem was the premium could go up on any anniversary date and the death benefit could go down in the same manner. He called the NWM agent who I will not name, but whose name I missed crossing out on the illustration and asked him if it was guaranteed for 30 years. He was told yes. That’s a lie. After we discussed why it was a lie my client called him back and asked him to send something he could give his financial adviser that would convinced him that the premium and death benefit were guaranteed level for 30 years. At that point the dirtball was caught and had to admit that it was really only guaranteed for the base policy of $449,000 and the other $551,000 depended on dividends which are not guaranteed.

Well, you know how I feel about anyone that would use assumptions to sell cash value policies and the fact that this Northwestern Mutual scum was asking this doctor to put a policy in force that he knew didn’t meet the contractual needs he had (30 years and $1mm) just ticks me off. When backed into this corner most agents with big whole life companies will point to their dividends, which for NWM were somewhere just shy of 6% for the first half of 2013. That’s pretty good until you consider that everything except the $262,000 this pig tried to push on the doctor was based on maintaining that for 30 years. And when you consider that their dividend rate has dropped every year for the last 29, including the absolutely bearishly rebounding 2012-13, what the heck is going to hold water in the policy?

Bottom line. Buyer beware. Whether crooked or stupid, there are a lot of cash value, IUL and whole life, agents out there that have products that can be manipulated beyond recognition. And they do just to win your business and their commission. If you have questions or have a policy that isn’t performing quite like you remember the agent saying it would, call or email me directly. My name is Ed Hinerman. Let’s talk.

Oh. Yes he was approved at a rate about half of what AIG approved because we took the time to figure out what everyone was scared of and get the facts on the table.