Ode to whole life.
I will start with my own personal experience. When I retired at age 69 I converted all of my policy cash values except one policy to joint and survivor annuities, which are now and have been for 16 years, providing us with a steady and comfortable income. At a time when others are seeing their 401(k)s and other investments going into the tank, we are unaffected. Our cash flow continues steady.
The one policy we kept also has an interesting history. It was originally taken out to assure our son's college education. Our reasoning was that the cash values could be used if we needed help, but if I had died, the $100,000 face value would have provided the full amount needed to put him through college. But neither of those events occurred and the policy remains in force. The dividends currently pretty much equal the premium so there is no cost to maintain it. The cash value is now over $80,000 and we regard it as a reserve for long term care if we ever need it. Oh yes, I know I could take that fund and invest it elsewhere and maybe do better. Or, on the other hand, if I had done that, today it might be worth less than $40,000. At my age guarantees mean a lot.
Let's go back to the beginning of my career. The New York Life training program required new agents, as one of their first projects, to interview two prominent citizens to get their views on the value of life insurance. The first one I interviewed was H.R. Askins, head of a very successful chain of auto parts stores in Arizona. Additionally, he had served as the national president of the Auto Parts Dealers Association and as Under Secretary of the Navy during President Truman's administration. He told me that his extensive life insurance portfolio was one of his most valued possessions. He said that because of it, he was able to take risks he would otherwise never have considered. He said some of these risks made millions while a few were flops, but it was his back-up insurance portfolio that made his success possible.
My second contact was Dr. Charles Kendall, minister of the oldest and largest Methodist church in Arizona. He too extolled the virtues of life insurance, especially in keeping families together in time of need and when death called. He cited a number of specific examples where he had been involved. After talking with these two gentlemen my conviction began to grow.
One of the most successful merchants in Arizona Switzers, a ladies ready-to-wear company. Switzers over time grew to have stores in Arizona, New Mexico, Texas and Nevada. But according to a report on TV it all started in the 1920s with a $1,500 policy loan by the founder. I have often wondered what the return on that $1,500 was.
Speaking of reports in the public domain, I once read that a large part of the financing for Disneyland came from policy loans on Walt Disney's personal and business life insurance policies. When you can't get money anywhere else, cash values are there for you. One of the greatest stories along these lines, and one I have told before, is about how H. Roe Bartle, colorful former mayor of Kansas City, saved 5 banks from ruin during the "bank holiday" of 1933. When no other funds were available, policy loans made by Bartle and the other directors saved the banks. Millions saved and millions made, all because cash values were available.
In a smaller way, but no less important, my own policyholders have benefited from the provisions of their whole life policies. Quite a large number of them have tapped their cash values to put their children through college. Others have used their accumulated values as down payments on homes they have purchased. An auto parts house in Yuma, Arizona, avoided a costly legal battle over a partnership interest when one of the partners died. It took both the death benefit of the deceased partner and the cash value of the survivor's policy to satisfy the widow. Absent the settlement, the business would have been dissolved.
But then there have been close calls. Toward the end of my selling career I received a call from the comptroller of Bagdad (Arizona) Copper Co. He said he thought they had about $800,000 in cash value of their corporate-owned policies, and he wanted verification. After checking I was able to confirm that the amount was correct and could be borrowed at 5%. He then said he wanted to borrow all of it because he could earn 10% in corporate bonds.
Because corporate resolutions were required it took quite a while to get the money to him. At a later meeting with him I apologized for the delay, to which he responded, "Don't worry about it, thank God for the delay, and you are going to get all the money back." He said the corporate bonds he was going to purchase were Penn Central Railroad and between the time he called for the loan and the receipt of the funds, Penn Central went into bankruptcy. The move would have cost him his job, he said.
Coming back to me, I pondered going into the life insurance business for 6 months before making my move. My reluctance was financial--it is tough to start over. But Gladys and I calculated that we had about 6 months' income in our reserve, mostly policy cash values. On the strength of that, we made the move, the most important financial decision of our lives and the most fulfilling.
This ode doesn't rhyme very well, but Webster says an ode is a lyric poem usually marked by exaltation of feeling. When I think of whole life I truly get a feeling of exaltation.
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|Title Annotation:||COMMENTARY: TO THE POINT|
|Publication:||National Underwriter Life & Health|
|Article Type:||Viewpoint essay|
|Date:||Mar 2, 2009|
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