- Thread starter
- #11
I didnt quite get that - I guess you mean that blending the WL with the ul/vul lets me add more pua and provides for a hecv?
And what makes penn better that say guardian for the blend - they have a "cash value enhancement" rider?
"Ideal" VUL
- Thread starter chithi
- Start date
And what makes penn better that say guardian for the blend - they have a "cash value enhancement" rider?
Not quite. You are blending it with term insurance to allow for a higher MEC limit so your can place more PUA's into the policy. Penn will allow you to ask it to calculate the best mix by telling it what kind of outlay you want to make and asking it to give you the lowest possible death benefit to save on expenses.
See here for more on policy blending.
Guardian isn't a bad choice at all, especially on the 10 pay side. L99 (Guardian's favorite whole life contract) is something I'd stay away from for this purpose. The only draw back to Guardian is a potentially more limited outlay as time goes on.
Penn also has an over-loan rider available to prevent lapse by lending out too much money.
Other options on the whole life side:
Ohio National (much trickier to get to work right with blending, but completely doable). They also have a great MEC funded product that will work for this.
Massmutual (PUA's are very inflexible though)
Lafayette Life (eh ok, but usually a bit of a laggard).
Minnesota Life (pretty good, actually)
Met Life (they just revamped their WL contract and made it quite a bit better, still not great for blending)
SBLI (great dividend history, no funding flexibility, terrible underwriting)
Northwestern Mutual (they can show cash in the policy, but removing money will put you in a completely different situation)
Mutual Trust Life (umm, no thanks). See more about whole life distributions here.
New York Life (crappy dividend, and weird blending, even their more intelligent agents tend to admit their whole life needs an upgrade)
Thrivent (
)IUL on the other hand could work out better. Typically if your outlay is over $20k IUL takes an advantage. There are some other reasons you might go with one over the other.
VUL, very market dependent.
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chithi said:
I believe he his suggesting that you blend the whole life with the term rider, which will lower the cost of the base premium and boost the cash values. The fact that Penn has a strong dividend history, combined with zero net cost loans and an over-loan protection rider makes their contract superior to Guardian.
- Thread starter
- #14
Wow - thanks for all the info.
A few more questions if you do not mind:
After all those that funded their 10-pay or 7-pay during higher interest rate years (and high dividend years) caught a good break in their funding period. I understand inflation was also higher then, so the the actual advantage is somewhat lowered, but it is possible that going forward we end up in a scenario with low rates & dividends but higher inflation.
A few more questions if you do not mind:
I had looked at the 10-pay, but (in addition to the restriction on additional outlay) is it possible that with the low rate environment we are in and with low rates likely to persist as time goes on, the dividends (which from my understanding follow the trajectory of bond rates) will keep falling, and would result in a policy cv that would not be able to sustain it in latter years. So the policy could be "paid-up", but the accumulation rate would be too low. And then since one cannot "add" to it, the policy cash value would get depleted?
After all those that funded their 10-pay or 7-pay during higher interest rate years (and high dividend years) caught a good break in their funding period. I understand inflation was also higher then, so the the actual advantage is somewhat lowered, but it is possible that going forward we end up in a scenario with low rates & dividends but higher inflation.
- 15,041
This is whole life, not universal life. Guaranteed cash value is just that. It is guaranteed, it cannot decrease unless you borrow from it or do a partial surrender. Also, once a dividend is paid, it moves to the guaranteed column.
- Thread starter
- #16
I see - so if I understand everything, the guarantees from a WL include
- death benefit
- cash value at the end of 10 pay period
- any future dividends on the cash value
for a ul/vul/eiul there is none
for a gul it is the DB provided there is sufficient CV.
- 15,041
Slow down.
A WL guarantees:
Death benefit
Guaranteed Cash Value
Premium and payment period (assuming no riders that may have a variable premium)
Dividends are never guaranteed. Now, once a dividend is paid and used to purchase paid up additions (PUA), those PUAs generate guaranteed cash value which is subject to the guaranteed interest.
So, a barring loans or other withdrawals, the cash value in a whole policy can only increase, it can never decrease.
Lets back up real quickly. You can fund Guardian's 10 pay beyond 10 years.
If blended, you can continue the PUA rider (you have to be careful about MEC limits). After 10 years you are restricted to the higher of 1x base premium or the amount needed to replace all existing term insurance with PUA death benefit. Once the term death benefit is completely replaced with PUA death benefit, it's just 1x base premium.
Also, to hammer on the point. 10 pay mean 10 pay. That's guaranteed. No adjustments to dividends or changes in interest rate environment can upset the any whole life 10 pay from being 10 payments to paid up. Cash value may not perform as illustrated on the dividend assumed side, but guaranteed means guaranteed no matter what.
You were pretty good until the last point. Dividends are never guaranteed. The only guarantee is the internal interest rate (4% on all policies issued under the 2001 Commissioners Standard Ordinary Mortality Table--aka CSO) paid-up addition cash value is included.
Death benefit would be guaranteed for all of them provided the policy's expenses are meant.
Hahah, this is more spot on than many probably realize. But that's a really deep insurance discussion that goes way beyond the scope of this topic. For the most part, guaranteed as long the stipulated premium is paid on time with no interruption.
And to highlight something here. Guaranteed cash value generally cannot be withdrawn unless the contract is surrendered. I'm not aware of a carrier that allows a withdrawal of guaranteed cash value on a whole life contract without surrender. It might exist, and if anyone knows of one, I'd be delighted if they shared.
Now as Vol has stated, partial withdrawal (i.e. permanent and irrevocable reduction of death benefit).
To be overly clear here, I'm talking guaranteed cash value from the original policy.
Guaranteed cash values must be accessed by loans if you want to preserve the death benefit (or from a more practical stand point, if you want to leave the option open to return the money and bring the initial guaranteed death benefit back to it's maximum).
This is not true of Universal Life insurance (all forms). In fact, it was the once positioned as a benefit to owning UL over whole life. Probably not a huge deal in the long run. Keep in mind that with PUA's death benefits grow to a much larger point than where they start out ~99% of the time.
If blended, you can continue the PUA rider (you have to be careful about MEC limits). After 10 years you are restricted to the higher of 1x base premium or the amount needed to replace all existing term insurance with PUA death benefit. Once the term death benefit is completely replaced with PUA death benefit, it's just 1x base premium.
Also, to hammer on the point. 10 pay mean 10 pay. That's guaranteed. No adjustments to dividends or changes in interest rate environment can upset the any whole life 10 pay from being 10 payments to paid up. Cash value may not perform as illustrated on the dividend assumed side, but guaranteed means guaranteed no matter what.
You were pretty good until the last point. Dividends are never guaranteed. The only guarantee is the internal interest rate (4% on all policies issued under the 2001 Commissioners Standard Ordinary Mortality Table--aka CSO) paid-up addition cash value is included.
Death benefit would be guaranteed for all of them provided the policy's expenses are meant.
Hahah, this is more spot on than many probably realize. But that's a really deep insurance discussion that goes way beyond the scope of this topic. For the most part, guaranteed as long the stipulated premium is paid on time with no interruption.
And to highlight something here. Guaranteed cash value generally cannot be withdrawn unless the contract is surrendered. I'm not aware of a carrier that allows a withdrawal of guaranteed cash value on a whole life contract without surrender. It might exist, and if anyone knows of one, I'd be delighted if they shared.
Now as Vol has stated, partial withdrawal (i.e. permanent and irrevocable reduction of death benefit).
To be overly clear here, I'm talking guaranteed cash value from the original policy.
Guaranteed cash values must be accessed by loans if you want to preserve the death benefit (or from a more practical stand point, if you want to leave the option open to return the money and bring the initial guaranteed death benefit back to it's maximum).
This is not true of Universal Life insurance (all forms). In fact, it was the once positioned as a benefit to owning UL over whole life. Probably not a huge deal in the long run. Keep in mind that with PUA's death benefits grow to a much larger point than where they start out ~99% of the time.
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You were pretty good until the last point. Dividends are never guaranteed. The only guarantee is the internal interest rate (4% on all policies issued under the 2001 Commissioners Standard Ordinary Mortality Table--aka CSO) paid-up addition cash value is included.
The 2001 CSO Table requires that the internal interest rate in all whole life contracts has to guarantee at least 4%?
The 2001 CSO Table requires that the internal interest rate in all whole life contracts has to guarantee at least 4%?
- 15,041
No one said they are guaranteed to be paid. But once paid and used to purchase PUA, they generate guaranteed cash value.
If you doubt it, get an inforce illustration and compare it against the original after dividends have been paid out. Now the guaranteed cash value is higher than on the original illustration. Also, they are now subject to the guaranteed interest and are also eligible to earn their own dividends.
