Hello everyone! I'm brand new to this forum and i must say that i love all the knowledge that you wonderful people share. My question is what do you know about the EIUL?Equity Index Universal Life. I can't help but think that it's the best product right now???? I'm 25 and i'm looking to purchase one of these policies. If everyone would be so kind, can you post anything you know about this product? Purchasing life insurance is a big decision and i dont want to make a mistake. I should add that i want a cash value, so term is out of the question. Thank You for any input!
EIUL
- Thread starter Hawws20
- Start date
- 403
All other things being equal, regular (non-indexed) UL should beat EIUL long-term. Both UL and EIUL invest most of the premium in the same long-term bonds. Carriers can incur higher costs on EIUL, in commissions as well as investments.
Carriers can afford to take more risk in setting credited rates on UL, because it's tied only to their own investment strategy, rather than an outside index. If they start with strong credited rates, and continue into the future, they'll probably beat EIUL, which has to use some of the invested premium to buy stock index call options, which decreases the amount they can invest in long-term investments. The real return on EIUL and UL depends on the long-term investments, not the stock index options.
That doesn't mean every UL will beat every EIUL. Some carriers get cold feet after issue, start crediting lower rates on UL, which can be harder to do on EIUL. However, EIUL carriers can also usually cut stock-index participation rates, so it's really a matter of whether you trust the company (not the agent).
There is a potential gliche with EIUL. The SEC Rule 151a, which is to take effect in 2011, could make EIUL a security. Nobody knows the implications on 2011+ issues of EIUL, and there could be some impact on pre-2011 policies as well.
Carriers can afford to take more risk in setting credited rates on UL, because it's tied only to their own investment strategy, rather than an outside index. If they start with strong credited rates, and continue into the future, they'll probably beat EIUL, which has to use some of the invested premium to buy stock index call options, which decreases the amount they can invest in long-term investments. The real return on EIUL and UL depends on the long-term investments, not the stock index options.
That doesn't mean every UL will beat every EIUL. Some carriers get cold feet after issue, start crediting lower rates on UL, which can be harder to do on EIUL. However, EIUL carriers can also usually cut stock-index participation rates, so it's really a matter of whether you trust the company (not the agent).
There is a potential gliche with EIUL. The SEC Rule 151a, which is to take effect in 2011, could make EIUL a security. Nobody knows the implications on 2011+ issues of EIUL, and there could be some impact on pre-2011 policies as well.
If it were me, I would buy a straight whole life policy. I do not recommend UL, or VL or any other fancy product. Usually there are hidden issues you don't want to be confronted with. You should contact an expert who will explain the pros and cons of ALL types of life insurance. Keep away from agents that push only one type.
- 118
I don't know your exact situation, but you mentioned that you want both life insurance and cash value. The options that come to mind include Whole Life, Universal Life, Indexed Life, and Variable Life.
I actually own 3 out of the 4 choices above for a variety of reasons (one was bought for me when I was a kid decades ago, so I didn't have a choice!).
JMO Fan made a few points that I want to expand on. Universal Life insurance has a declared interest rate by the insurance company that can change at any time - usually the current rates around 3-5%, depending on product and carrier. Indexed life products have averaged a 6-9% annual return over the past decade, depending on product and carrier.
Universal Life credits interest based on fixed income securities, such as corporate bonds. Indexed Life expands on this by having the carrier use options contracts (calls and puts) to attempt to emulate the performance of a stock index, usually the S&P 500. Returns are subject to a floor and rate ceiling, decided on by the insurance company. Many companies offer a minimum annual interest rate and also a minimum annual index cap rate to protect policyowners from catastrophic drops in caps.
The math has been done, and for the most part, I have seen EIULs generally outperform ULs over the past decade, even with increased premium charges. The upside potential of the indexing is something that my clients really appreciate as a potential inflation hedge versus the fixed, static declared UL/Whole Life rates.
If you're only 25 years old, are healthy, and won't need to touch the cash value for years (perhaps in retirement), I would recommend a 2 year PtP strategy EIUL and pay target premium or more. The EIUL has downside protection with upside potential, all while providing you a death benefit that you can enjoy today in case of disaster.
I own and sell Whole Life, EIUL, and VUL. Out of the 3, the EIUL has been a consistent favorite product with my clients who want a balance of long-term potential cash values and fixed insurance protection.
Hope this helps
1) "Past performance does not guarantee future returns"
2) Are you sure you want to place your insurance at market risk?
Look at the headlines... we are not in the same old economy. Some are predicting the Dow will drop to 4000 before this is over, and they may well be right. Insurance should be risk free, not risk tolerant. You are insuring your family in the event you pass away. Do that and don't try to get fancy with all kinds of money making schemes. Keep it simple.
- 149
I think what people here have to understand is that an IUL (indexed universal life) is not the same thing as a VUL (variable universal life) invested in an index fund. In a IUL the index simply sets the crediting rate (the interest you earn each year on your cash value). Your money is not invested in the market. IUL also have a minimum crediting rate so that if the market where to go down you would not recive a negative crediting rate. Some IULs also offer gaurantee riders so that the death benefit is guarnteed even if the min crediting rate is hit every year. IULs are not for everyone, but they can be a viable option in many cases.
EdHead
Expert
- 29
If you want cash value take out a WL policy, you could even over fund it if you wanted to.
You would be wise to sit down with someone who will look at your whole financial picture and see what kind of insurance will best fit your actual needs.
- 118
What he said.
1) "Past performance does not guarantee future returns"
2) Are you sure you want to place your insurance at market risk?
Look at the headlines... we are not in the same old economy. Some are predicting the Dow will drop to 4000 before this is over, and they may well be right. Insurance should be risk free, not risk tolerant. You are insuring your family in the event you pass away. Do that and don't try to get fancy with all kinds of money making schemes. Keep it simple.
I was talking about EIUL, not VUL. EIULs are not subject to market risks and are not a security. I mostly agree with you in that subjecting your CV life insurance policy to potentially negative returns is a bad idea, unless the VUL is being used for some kind of creditor/tax protection.
IMHO EIUL is quite simple, and in many situations I've found it to be superior to Whole Life due to its upside CV potential, flexibility, and lower target premiums (on the products I use, at least). If you want to keep it absolutely simple, take out a term life policy and "invest the rest" into a mutual fund!
Last edited:
-------------------------------------------------
I realize that... but all insurance company variations on UL use some form of market return to establish that product's growth, even if it is corporate bonds. My point is that in this present economy, I don't think it wise to go out on a limb when we should cling next to the trunk.
------------------------------------------------
------------------------------------------------
Nothing like putting a stake into the corpse of A.L. Williams, eh?
- 437
Marpol, your exactly right. The majority of the agents in our industry are not "industry experts" on the vast array of products we potentially have at our disposal. Rather, evidenced by thousands of conversations on this forum, they argue about what they feel is right without even knowing about or understanding all the other options.
My experience has been that very few agents who sell life insurance fully understand IUL. When the comment from an agent comes up that is something like.. "do you think your insurance dollars should be at risk" means they shouldn't even be engaged in giving their viewpoint about IUL. A common misconception is that in an IUL the insurance company is investing premium dollars in some sort of index...This is absolutely incorrect! Instead, it is investing premiums in fixed-interest investments and using the earnings from those investments to purchase call options.
Call options provide the right, but not the obligation, to purchase a specific amount of a given index at a specified price within a specified period. If the equity index increases, the insurance company can exercise the option at a previously agreed upon price and then credit the interest to the policyowner.
Let me say that I only about 25% of my life premium this year has been IUL, the rest mainly whole life and UL. Looking on the horizon though I would predict that IUL will be the only life insurance product with sales increases in 2009. Why? Because people want what this product can do....especially those members of the baby-boomer crowd who bought term-life during the age of the great "A.L. Williams buy term and invest the difference scam" and are now realizing they want and need some permanent coverage. Side note, A.L Williams company Primerica is now owned by CitiGroup, which happens to be one of the five largest coporate owners of permanent life insuance in America. That is poetic.
There has been a ton of pushback regarding Indexed Universal life from within the industry. The four larger mutuals, New York life, Northwestern Mutual, MassMutual, and Guardian (I'm a fan of life insurance with a mutual company btw) unfortunately have viewed this product a huge risk to the profitability of their whole life product and refused to enter the marketplace. They have cited all kinds of bs as to why they think this product is too risky....let's be real Variable life and VUL are much riskier products from a clients perspective. Congratulations to the mutuals with an abundance mentality who have a great IUL product out there like Penn Mutual's Accumulaton Builder as well as Minnesota Mutual's Eclipse product.
In 2011 I think it will be funny to watch the so often criticized indexed annuities and indexed life insurance being praised and sold by the same people who are critizing it today. The brokerage houses and captive agents obviously throw these products under the bus because they don't have access to them nor have they every received any type of sales training or product training on them. When FINRA regulates these products (making it now safe and good in these companies eyes) however everyone will jump into the fruitful waters of the indexed world because of it's many advantages. I think the most popular Eddie Jones billboard or window poster will be "talk to me about upside market potential without any downside risk". What a great idea
Last edited:
