The Visible Policy exists to accomplish several goals.

• Describe How my Policy Works
  Whole Life insurance policies are complex.  I have spent a lot of time searching the net, and there seems to be no site that explains the details.  Company sites are run by their marketing department -- since actual details might confuse you, there aren't any.  Other sites are full of generalities, platitudes, opinions, advertising, and\or attitude.  Except for the ads, I have those too.  .. plus lots and lots of details ..
  • Never give a platitude with attitude unless you can back it up!
  • This is a description of my policy only.
    I do not know how it compares with other participating policies from New York Life, much less from other companies.  Any similarity between what I have and what you have or are considering may be purely coincidental.  Still, it is likely that the actuaries deep in the NYL vaults think a lot like their counterparts at other companies.  And they are all bound by the same statistical laws.
  • There is good insurance information on the web.
    Here are links to information that may be more useful to you than mine.

• Compare my Policy with a "Buy Term and Invest the Difference" Strategy
  I don't believe there is a single life insurance site on the web which doesn't address this issue.  My general answer to "Should I buy permanent or term life insurance?"  is  "How the heck should I know?".  At least you will be able to see an apples-to-apples comparison; maybe this can help you decide for yourself.

• Share my Model
  I have constructed a reverse-engineered model of my policy.  It is in the form of a OpenOffice.org ® v1.0 spreadsheet.  If you really want to check my work or would like to modify the model for the specifics of your policy, go for it.  Just remember that it might not be right.  It is built from the outside looking in, with very few details known of what is "really" happening.

• Encourage Insurance Companies to Provide Interactive Policy Models
  If I do a credible job explaining things from the outside, imagine what the company itself could do.  They are the ones who know how their products are truly structured.  I have to calculate, ignore, or sometimes guess at details such as commissions, fees, and cost of insurance.  Darn-it, marketing, give some pages to your actuaries, and tell them to have fun!

• Encourage other Web-Savvy Policy-Holders to Share their Policy Info
  Get with it guys and gals.  I know I'm not the only person in the world who can do this.  (Maybe the only one dumb enough to try...)

These are not exactly "frequently asked questions".  Until you-all start asking things, please settle for these questions infrequently asked.

• "What makes you qualified to do this?"
  I'm not.

• "?!?"
  

  Well, ok, I was good with story problems in grade school.  My father was an accountant.  I've seen people talk about life insurance on TV. ... Seriously, I'm just a computer programmer with a background in graphics, embedded software, and graphical user interfaces.  When I bought my policy, it was a mystery begging to be taken apart and understood.  I've done my best, but only the actuaries deep in some dungeon at the New York Life Building will be able to determine how good my analysis is.

  New York Life

• "Rich, how do you earn money from this site?"
  Um, I don't.  I pay for the web space and put in my own time to author The Visible Policy.  So it costs me money; it does not earn any.  (Now you know I am not a qualified financial expert! ;)

• "Rich, can you help me decide ... ?"
  No!   I don't know anything about your circumstances, nor do I have the time to do special analysis for strangers.  Sorry.  Insurance agents and fee-only financial consultants are trained and licensed (and get paid) to help you make financial choices.  Be careful with your money, get outside opinions from friends and family, then do what makes sense.  The fact that you are reading this shows that you are doing some research on your own.  Keep up the good work.

• "Rich, can you provide the spreadsheet in Microsoft Excel ® format?"
  No.  I am not licensed to use Excel nor distribute documents in its proprietary format.  The OpenOffice.org ® spreadsheet uses a non-proprietary format which anyone is free to use as they wish.  I am a strong believer that the web should be 100% open, and totally free of proprietary limitations.  OpenOffice.org is perfectly capable of loading and saving Excel spreadsheets, but I cannot know if you are a licensed Excel user.  Hopefully Microsoft will adopt open standards and support the OpenOffice.org spreadsheet format.  If not, and you actually have a licensed copy of Excel, ask Microsoft to support the OpenOffice.org file formats.
  • OpenOffice.org ® is free and currently available for the various 32-bit flavors of msWindows, as well as UNIX and Linux.  A Macintosh version should be available soon.  If you are a programmer and want the source code, it is available at 'www.openoffice.org'.
  • Microsoft Office ® costs hundreds of dollars.  Um, did you say something about wanting financial advice... ?

• "(What a nerd!)  I guess you don't want any feedback then, right?"
  Actually I'd love to get feedback.  Corrections, suggestions, ideas, money, etc. are all welcome.  If there is enough interest, I may even add a bulletin board to this site.  (You're not the only one who can whisper, buddy.)
  

• "{blushes}  Rich, your site is boring."
  That is not a question!  So I get to ask you one.  Could we compromise on the phrase, "extraordinarily plain"?

• "Rich, do you gotta be so complicated?"
  Sorry; I try to explain clearly and thouroughly, and sometimes -| ahem!
  Fred the Actuary interrupts:  Rich, I'll handle this one.  Complicated?  That's funny.  Here is complicated, a little tidbit from one of my first year courses on life insurance:
  
  You don't even want to know what we went through the second year.  If you ever found out, we'd have to recruit you.
  Uh, thanks, Fred.

• "Rich, why do you have so much text per line?"
  You control how much text per line, not me!  Make your browser skinnier.

• "Is permanent life insurance a financial investment?"
  Yes.
  Uh-oh -- Now insurance commissioners in 20 states know that I am unqualified to do this.  They tend to frown on anyone using "life insurance" and "investment" in the same sentence without the word "not" in-between.  Fortunately for me, my only connection with insurance companies is ownership of a policy.  I am not trying to sell anyone anything.  I am not recommending purchase of anything.
  • Here is Rich's Definition of a profitable investment:
    If the long-term value of out-of-pocket money increases faster than the expected inflation rate, that money was profitably invested.
    So, a permanent life insurance policy bought from an honest, well-run, established, insurance company will likely be an investment.  On the other hand, money placed in a bank's absurdly-named "savings account" will likely be sucked dry.
  • Note that I emphasized "long term".  If you purchase permanent life insurance but let the policy lapse in less than ten years, you likely made a terrible investment.  Your money would have actually been better invested in that savings account.  After a decade, your investment should start gaining real value, more than making up from losses incurred in the first few years of the policy.

• "Can one use a whole life policy to 'be your own banker'?"
  Yes, it can work well.  It is certainly not for everyone, though.  Basically it involves taking disciplined policy loan(s), making sure to at least pay the premium and interest annually so your policy does not actually lose value.  Eventually, you will pay back the principle as well.  Do an internet search for "be your own banker" if the idea intrigues you.  It does not really intrigue me.  Here is a list of items I would consider before doing it.
  1. Is my income secure, and do I have other sources of cash for emergencies?
     One can have his policy significantly gutted if he is unable to make the interest payments for several years.  The policy could even lapse, reversing into tax liabilities any tax advantages this process may have had.
  2. Does paying interest to a bank really bother me that much?
     Proponents love the fact that they are "paying themselves back" instead of feeding greedy bankers.  Me? "Meh."
  3. Is my policy from a conservative mutual life insurance company?
     Well, yes it is.  The company's earnings need not be split between policyholders and stockholders.  They are not likely to run into financial difficulties due to short-term decision making and/or outright stupidity.  (Did you notice that the mutual life insurance companies were barely phased by the 2008 "financial meltdown"?)
  4. Is the economy undergoing a period of high inflation?
     Believe it or not, this is the time I would seriously consider taking out a policy loan.  As the economy underwent the Nixon/Ford/Carter years of high inflation, many folks with participating whole life policies were able to take out policy loans at 4% or 5%, and invest it into a CD at 10% to 12%.  I could certainly see myself being my own banker with that kind of deal.  (Modern insurance policies have higher loan interest rates; I am sure the companies did not like seeing much of their reserves end up in banks and credit unions.  It might still work, though -- just not as dramatically well.)
  It is worth mentioning that someone smart, disciplined, and financially stable has many good options.  Being their own banker is only one of them.

The following pages compare five different strategies relating to life insurance.  For compactness, each chart abbreviates the strategy name as described below.  The charts were generated by an OpenOffice.org spreadsheet.

1. Minimum Term+Invest ("min T+I") Strategy
   The first law of a life insurance site is compare permanent insurance to a "Term+Invest" methodology.  Permanent insurance is generally much more expensive than term insurance.  So, if you bought term insurance and invested the extra money yourself, which would be "better"?  I put better in quotes because there are so many variables as to make the question impossible to answer in a general way.  At least this site has numbers and details.
   
   The word minimum means minimum out of pocket compared to the other Term+Invest strategy (5).  This is the same amount of out of pocket cash used in next strategy.
   
   
2. Base Whole Life ("WL" or "WL Base") Strategy
   This begins as New York Life's policy illustration provided by my agent.  The "illustration" consists of long columns of numbers printed out on paper.  These were copied into the spreadsheet.  A lot of additional columns were added to those provided.  I attempt to deduce what is really going on, and other columns allow comparison with the other strategies.
   
   
3. Whole Life with Option-to-Purchase ("WL w/OPP") Strategy
   My actual strategy has me "paying ahead", ie, I am sending more money than I need to, beginning the very first year.  My policy allows this under its "OPP" rider (Option to Purchase Paid-up additions, described in more detail later).  Overall, I plan to spend about 50% more than my policy illustration predicts is necessary.
   
   
4. Whole Life with Extra Payments ("WL w/XP") Strategy
   The first 12 years of this strategy are exactly the same as #2.  However, out-of-pocket premium payments are made for several more years.  Premiums are due for the life of the policy, but NYL's policy illustration projects that it might become self-supporting after 12 years.  That is, dividends and already accumulated extra value are used to pay the premiums.  But what would happen if a policy holder decided to pay the premium himself for a few more years, even though it is not actually necessary?  The total amount invested in this strategy is the same as OPP, but "back-loaded".  Extra money does not go into the policy until after 12 years are up.
   
   
5. maximum Term+Invest ("max T+I") Strategy
   This is similar to the minimum T+I strategy, but with the same extra amount of out of pocket money as the OPP strategy.  Like WL w/OPP, these payments are "front-loaded" to get more money invested sooner.

When referring to the mathematical aspects of a strategy, I use the term model.  Technically, the spreadsheet "models" these strategies based on input data and formulas I provide.  If the source data is incorrect, or I use the wrong formulas, then the model is flawed.  Any conclusions made by a flawed model about a given strategy are obviously highly suspect.  My actual spreadsheet is available for download so that other people can check my work.  Also, being a spreadsheet, people can alter the models to do various "what if" scenarios.

I have tried to make this site easy to use and consistent in style.  It covers a complex topic in an in-depth manner -- that is my only defense.  You are the final judge of how good of a job I have done.  Please be merciful!  Here is an overview of features meant to make using this site a bit easier.

• Navigation links are at the top and bottom of each page.
  

• Charts pop open into a smaller stand-alone window.
  I might spend 10 inches of text talking about one chart.  So the chart is way up there while you are reading way down here.  To let you see the image at the same time you are reading the description, click on it.  A second smaller window will open up.  You can position this as necessary while you read.  It can also be resized.

  (I use PNG images for all my charts; both Internet Explorer and Netscape have supported this advanced image type since the 4.1 versions. Some IE users may have a bit of a problem.  There are versions which don't know that they support PNG, even though they actually do.  The browser won't open PNG images, but will display them if part of a web page.  (I'm not making this up!)  If you have this problem, either upgrade your IE or use Netscape.)
  

• Most topics are discussed in an outline form.
  Indenting is used to indicate the scope of the current subject.  You should be able to skim through this site by just reading the topic lines.  I know I tend to be wordy.  This is your defense.

• I attempt to use a humorous style.
  Unfortunately for you, this is the only sense of humor I have.