Helping Clients Understand Universal Life Policies

[Guest]

Newby;

That's an EXCELLENT approach. Good on ya', mate! I'm going to use it.

 

[craigmac1977]

Scott,
Your right I have trying to over complicate things by explaining the details why dying UL policies. I also only deal with clients 50 - 85 yoa, and getting them to understand the policies is very difficult. It think just hearing it from the company themselfs is going to be the way to go.

 

[Death Cab For Tootie]

Newby;

That's an EXCELLENT approach. Good on ya', mate! I'm going to use it.

Seconded. I'd love to be a fly on the wall, listening to the home office flunky on the other end of the line.

 

[DLierMN]

I deal with clients and brokers on this almost daily. Unfortunately for many people they were sold a UL with unrealistic interest rate assumptions and at the same time there were increases in expenses. Top top it all off, they often have loans on the cash value and they are currently uninsurable. It is the perfect storm. I have had conversations with clients in the 80's and 90's that lived way beyond what was projected at the time of sale and it is hearbreaking to try to explain to them what happened and what would need to happen in order for them to continue the coverage.

While carriers and brokers seem to be well on board the bandwagon of using UL, IUL, VUL, etc to accumulate cash values to use later, I have never really believed that this is an attactive option for most. Since carriers started offering guaranteed contracts I have been a huge advocate and that is virtually all I quote now when a broker or client requests a UL. The cost difference is negligible and the additional protection is well worth the potential loss of cash value.

As you may have seen, many carriers have been making changes to their GUL products and due to the reserving and capital requirements I honestly think that you should be promoting these products now - don't wait. I think they will increase in cost substantially or in some case, go away all together. Good luck.

 

[WinoBlues]

Newer agents may want to get familiar with 1035s and UL rescue

A lot of these under performing ULs can be 1035'd into a new policy. The cash values can bring down the cost of a rating or help short pay a new policy. Sometimes the higher age and ratable health of a client can still be overcome, to a degree, by a combination of 1035ing the cash values, lowering the face and dialing down the guarantee to 20 years or so. Note: Explain the dial down and get it signed.

An added bonus for the agent is getting an annual first year commission and renewal on the whole target. Even if the monthly premium has been bought down.

A note on the GULs. I like to over fund them a bit. By increasing the monthly premium just a bit, the policy can get to the point that a month or two of missed premiums will not cancel the guarantee.

 

[scagnt83]

Newer agents may want to get familiar with 1035s and UL rescue

A lot of these under performing ULs can be 1035'd into a new policy. The cash values can bring down the cost of a rating or help short pay a new policy. Sometimes the higher age and ratable health of a client can still be overcome, to a degree, by a combination of 1035ing the cash values, lowering the face and dialing down the guarantee to 20 years or so. Note: Explain the dial down and get it signed.
.

Thats a great point. Plus, some companies will accept other companies loans and you can do a loan rescue often times if the client is still insurable..
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A note on the GULs. I like to over fund them a bit. By increasing the monthly premium just a bit, the policy can get to the point that a month or two of missed premiums will not cancel the guarantee.

Thats a good idea

 

[Robert Barney]

A note on the GULs. I like to over fund them a bit. By increasing the monthly premium just a bit, the policy can get to the point that a month or two of missed premiums will not cancel the guarantee.

Be CAREFUL with that. In some cases over funding a policy means nothing if you miss a premium later. On the other hand, I like 20 pay or pay to 65 variations where you can predetermine a premium level that will leave the policy full paid-up. Once you hit that point, you can miss all the premiums you want.

 

[Bitnis]

What is or can be "Guaranteed" in a GUL policy. How does the no lapse rider fit into this?

Why is GUL cheaper than whole life? If it takes a certain premium to maintain the death benefit in a GUL then what is the difference?

Can you "dial down" all UL policies? Is this used to keep the policy in place for a period of time while taking the cash value out to fund another better policy?

How can I recognize a bad UL policy?

How can I recognize a good UL policy?

Thanks to anyone who takes the time to answer these! This is one thread I need to pay attention to. UL is confusing. And for some reason ($$$) companies sure do push their UL products.

 

[scagnt83]

What is or can be "Guaranteed" in a GUL policy. How does the no lapse rider fit into this?

"A true GUL policy is a UL policy that has a guaranteed DB. Basically as long as you pay the premium, the DB will be guaranteed. But there is no guarantee of CV. Most GUL policies are designed to have very minimal CV. Its a DB product period. If you miss a payment the guarantee goes away, but the policy does not necessarily go away; however the guarantee can be caught back up by catching up in missed premium.

Some traditional ULs have a "Guaranteed Rider" that will guarantee the DB no matter what the interest rates do. Again, you have to consistently pay premiums and there is no guarantee on the CV.
Some agents mistakenly call a traditional UL with a guarantee rider a GUL, but a true GUL is a separate product.

Also, GUL has a level DB. There is an increasing option, but it hardly increases, and usually goes back to the original at some point in the policy, so its basically always a level DB."


Why is GUL cheaper than whole life? If it takes a certain premium to maintain the death benefit in a GUL then what is the difference?

" You might have figured this out from above, but GUL does not guarantee any CV at all. This is the main reason its cheaper. Also, it does not build up CV like WL does. This is another reason. Plus, (generally speaking) all UL will be cheaper than WL because the COI is lower to begin with in UL (basically the COI is same age, not fixed at purchase age like WL)

Also, since GUL has a level DB and WL is increasing, this plays a big part into this as well.
GUL does not protect you from inflation!!!"



Can you "dial down" all UL policies? Is this used to keep the policy in place for a period of time while taking the cash value out to fund another better policy?

"Yes, you can "dial down" all UL policies.
No. It is not necessarily used to keep the policy in force while taking out CV.

This is speaking of lowering the DB.

Its used for a variety of reasons.
It might be that the policies interest rates have not performed as expected and it is starting to fall apart (DB falling and CV falling year to year). There are only two ways to fix this; lower the DB, or increase premiums.
This is the main reason to decrease the DB on a UL.
Also, if premiums are just too much to handle, a client can do this.


But on another not, many types of policies let you lower the face amount. NYL used to do it on WL all the time. There are term policies that will do this as well.


How can I recognize a bad UL policy?

Bad as in a bad inforce policy? Or bad as in a bad new issue policy?

Inforce is easy. Look at the performance. Get an inforce illustration with an outlook until 100, see if the historical rates keep it in force until then.

New policies are a bit harder. Most UL companies have really tightened up the product, so its not nearly as bad as in the old days.
Look at the minimum interest rate, historical rate, current rate, loan rate, the fee structure, and the max COI charges.

JH, LFG, Penn, Trans, MoO, Aviva are all known for having quality UL products. I usually use LFG and JH as my go to options

How can I recognize a good UL policy?

Answered above


Thanks to anyone who takes the time to answer these! This is one thread I need to pay attention to. UL is confusing. And for some reason ($$$) companies sure do push their UL products.

UL is a confusing product at first. This is why many poorly designed policies where sold at first.
But the beauty of the product is its flexibility.

In the estate planning and corporate benefits field UL is used almost exclusively. There is a good reason for this!
I might go more in depth into ULs later. They make up about 60% of my LI business.

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[briko3]

Overfunding a GUL will allow you to "possibly" miss a payment early on, but almost all GULs will eventually have a 0 cash balance and overfunding won't help a lot in later years.