Fees of newer multiplier index segments

[Allen Trent]

Its my belief that they do it for commission...that agent is getting paid on $3k target rather than $1300. I've never built any policy with additional room in hopes that they may put more in. I totally agree....much better to build a max funded policy that they know they can fund, AND add a convertible term (for the what if later).
The problem in this industry... there are organizations that sell IUL this way regularly. SMH

you only get paid commissions on the premiums that make it into the policy, so that wouldn't make sense normally. however, some carriers do give 2 years for the client to pay the target premium, so that could mean 1300 1st year paid as new & 1300 in 2nd year paid as new instead of a term contract that would pay all renewal or 0% after 1 year.

crazy & rotten if that is why

 

[DayTimer]

the IUL illustrations show the average return happening each & every year & don't show any actual historical return that would show some big years, some 0 years & some flatter years.

Right, it shows what would happen only if the actual return matched the illustrated return each and every year. One zero year requires a 12.36% credit the following year to get back on track. Two zero years in a row would require a 19.1% return in year three to get back on track. The illustration shows how the product may perform if the interest credited were 6% each and every year.

Again, there is no cap on cost of insurance, which is ultimately what brings down any UL that is brought down.

 

[pfg1]

Right, it shows what would happen only if the actual return matched the illustrated return each and every year. One zero year requires a 12.36% credit the following year to get back on track. Two zero years in a row would require a 19.1% return in year three to get back on track. The illustration shows how the product may perform if the interest credited were 6% each and every year.

Again, there is no cap on cost of insurance, which is ultimately what brings down any UL that is brought down.

But what they are doing with that 6% illustration rate is building in the zero years. They are saying, some years you will max, others you will zero... some will land in between, ultimately averaging 6% over the life of the product.

Not advocating for it, just saying. I looked at a client file... in the last 6 yrs they averaged slightly over 7% avg per year, with two zero years. Throw in another zero year and they are right at 6%. They hit the max cap in 3 of those years, 1 was less than max and 2 were zero's.

 

[DayTimer]

But what they are doing with that 6% illustration rate is building in the zero years.

Maybe, but we'll have to wait and see how it pans out in another 10 to 20 years. That is not something I have to tell a client when showing them a 10 pay or 20 pay participating whole life, at least not to the same degree.

I'm now 50, and I got whacked good and hard in 2000-2002 and again 2007-2009. I still have the headache, so I'm perhaps exceedingly cautious and suspicious of linking something as important as supplemental retirement income or a needed death benefit to IUL. I'd rather using participating whole life and an annuity product.

 

[Allen Trent]

I'm now 50, and I got whacked good and hard in 2000-2002 and again 2007-2009. I still have the headache, so I'm perhaps exceedingly cautious and suspicious

just want to confirm we are still talking about IUL---wasn't sure for a minute there. Sounded like a story about hard times in Vegas binging on booze & women.

 

[pfg1]

Maybe, but we'll have to wait and see how it pans out in another 10 to 20 years. That is not something I have to tell a client when showing them a 10 pay or 20 pay participating whole life, at least not to the same degree.

I'm now 50, and I got whacked good and hard in 2000-2002 and again 2007-2009. I still have the headache, so I'm perhaps exceedingly cautious and suspicious of linking something as important as supplemental retirement income or a needed death benefit to IUL. I'd rather using participating whole life and an annuity product.

I'm with you, I prefer WL. It may not perform quite as well... but it will do good and won't crash and burn ever.

 

[ATM]

The biggest downfall of IUL, imo.... being its sold as a flexible premium. If/when the crap hits the fan financially, the first thing a client will do is cut the premium back to the minimum. Once they are used to paying the min, its rare that they will go back up in my opinion.

This is one reason why WL works better. They can cut back to the minimum, but it will still perform if they pay that minimum. Yes, it won't kick butt like it would if max funded, but it won't lapse and will still be a decent policy in the long run. IUL will eventually lapse at min payment.

So if the SHTF and interest rates go to zero or lower for an extended period exactly what type of magic will whole life carriers perform to be able to meet their promises?

The basic issue is the same for all insurance carriers. They make promises of future payouts based on expected returns. When those returns don't happen, whole life policies will implode because the insurance company is guaranteeing two things - cash value and the death benefit and they all have legacy policies on the books that they would love to get rid of.

I expect in the not too distant future we will start hearing about insurance companies that are offering policy holders $$$ above surrender values to cancel their policies.

 

[Allen Trent]

I expect in the not too distant future we will start hearing about insurance companies that are offering policy holders $$$ above surrender values to cancel their policies.

It has already been happening in the variable annuity business & maybe other guaranteed income riders. Not sure how that isn't a violation of SEC regs by offering someone cash to walk from old outdated high income guarantees.

Pensions have been offering cash buyouts too