New Information Available on MassMutual Whole Life Policy Loans

,

Assets feature key details on adjustable loan rates

As interest rates have increased, so have adjustable loan rates (ALRs) for several MassMutual whole life insurance products. To help producers stay current on these changes, the company will post ALRs monthly. In addition, MassMutual Designs and WinFlex Web illustration output has been updated to make the policy loan information more prominent and easier to find.

ALRs may change monthly, have been changing more frequently now than in recent history, and vary across MassMutual whole life products. Inforce policy ALRs may be reset annually based on the ALR in effect in the policy anniversary month. The new table of Adjustable Loan Rates for Whole Life Products Currently Available for Sale will be updated monthly to show recent changes and trends.

Whole life products currently available for sale (as of Nov. 20, 2021) are:

  • Survivorship Whole Life 100.
  • Whole Life 10 Pay.
  • Whole Life 15 Pay.
  • Whole Life 20 Pay.
  • Whole Life 65.
  • Whole Life 100.
  • Whole Life High Early Cash Value (HECV).

 Note: Whole Life 12 Pay and Survivorship Whole Life 12 Pay will be available in August in most jurisdictions.

Key details on policy loans and loan rates also are included in basic life insurance illustrations. On June 1, WinFlex Web updated the “Narrative Summary” to include “Important Information About Policy Loans,” which states:

A higher policy loan interest rate can impact policy values and the amounts available for future loans and distributions. For this reason, we strongly recommend that you request an illustration with a hypothetical higher loan interest rate.

Best practices for BGAs and producers:

  • With interest rates increasing, ensure customers understand the impact of increasing loan rates on their strategy.
  • For example, a 1.0% increase in a policy’s ALR can result in a significant reduction in the maximum income available under the policy.
  • Or if loans are used to pay premiums, a 1.0% increase in the ALR may require the policyowner to make out-of-pocket payments to repay the loan to prevent early policy lapse.
  • Also, coupled with a lower dividend scale, increases in the policy’s ALR can adversely affect the policyowner’s total cash value and death benefit.
  • When illustrating complex case designs that use policy loans, run a stress test, and show clients illustrations with higher loan interest rates and/or lower illustrated dividends to set expectations.

Review The Adjustable Loan Rate on MassMutual Whole Life Insurance Policies FAQ for additional details about:

  • How the ALR for a whole life policy is determined.
  • The Moody’s Long Term Corporate Bond Yield average.
  • Why MassMutual uses the Moody’s Long Term Corporate Bond Yield average.
  • Why the loan rate may be inconsistent with other observable interest rates.
  • How a loan on a whole life policy with ALR correlates to the annual dividend.

Additional resources will be shared as they become available.