Is CV a marketing gimmick in VUL?

[BiggitySwat]

John Hancock and Lincoln National have no-lapse guarantee riders that you can add. For about the same price as a no lapse fixed UL, in many cases you can buy a VUL with a guaranteed death benefit to age 121 or 100 or 90, etc., but you still get the upside potential.

Don't forget though, that if you take a single loan or partial withdrawal out of those "NLG" VULs, it will BREAK the NLG rider and your client will lose the guarantee. Also, if the client just wants guaranteed protection and doesn't care about cash value, a NLG Indexed Life product may have a lower target premium for the same face value (I ran the numbers a few times and noticed a pattern).

If someone wants guarantees for life, I just show them a Whole Life or NLG IUL/UL. VULs are meant for cash accumulation and speculation, not guarantees!

 

[victor27s]

If the client is aggressive, they may prefer the VUL even if they don't plan on taking income from the policy. The VUL undoubtedly has a greater upside potential and if the cash value gets high enough, you can stop paying premiums and have a paid up policy guaranteed. Lincoln National will notify the client when there cash value is high enough where they can suspend premiums if they choose to.

As far as your statement about VUL's not being for guarantees, but for cash value. It's a very general statement. The fact is that VUL's today do have guarantees. If you have a client that wants to have some type of guarantee, whether it be 20 yrs, 30yrs, lifetime, etc., and they are attracted to the unlimited upside of the seperate accounts, then the VUL may be a better option than the WL, indexed life or fixed life.

I don't think any type of product is better than the next. I understand all of them and use them when appropriate.

 

[Franz Kafka]

If the client is aggressive, they may prefer the VUL even if they don't plan on taking income from the policy.

Being "aggressive" refers to taking a higher risk to potentially reap higher reward. So what's the reward if they are not touching the CSV? They are taking a higher risk to get that potentially higher death benefit?

The VUL undoubtedly has a greater upside potential and if the cash value gets high enough, you can stop paying premiums and have a paid up policy guaranteed.

It also has an undoubtedly greater downside potential and if the CV gets low enough, you can also stop paying premiums because you now have no policy to pay for. If they still want to keep the policy what's the premium going to be in their old ages?

As far as your statement about VUL's not being for guarantees, but for cash value. It's a very general statement. The fact is that VUL's today do have guarantees. If you have a client that wants to have some type of guarantee, whether it be 20 yrs, 30yrs, lifetime, etc., and they are attracted to the unlimited upside of the seperate accounts, then the VUL may be a better option than the WL, indexed life or fixed life.

VUL with 2ndary guarantees are still a little cheaper than a WL for the same DB. But for what?? For NO guarantee in CSV.

I don't think any type of product is better than the next. I understand all of them and use them when appropriate.

You may understand them perfectly but do your clients understand them as well? Do they really understand that their policy may lapse in their 70s? Do they really understand that they can't touch their CSV with 2ndary guarantees? I ask because I haven't met ONE SINGLE VUL holder who understood these possibilities. 8 out of 10 permanent policies I come across are VULs and I NEVER tell them they have something "bad". I only ask them if they understand the risk they are taking and they all look at me like a deer in a headlight.

 

[victor27s]

Frank,

1) The higher cash value will allow you to potentially stop paying premiums, instead of paying for the rest of your life. Lincoln will actually notify you when your cash value gets high enough that you can stop paying premiums. You can illustrate this as well, so the client will know how high their cash value needs to get before they can stop paying premiums. Also, if you over fund the policy, the excess premium goes into a side fund, which you can later take income from without any impact on guarantees.

2) Like I said in previous posts, there are VUL's today like Hancock's and Lincoln's that have a LIFETIME GUARANTEE, and at younger ages (20 - 50) are about the same price as a GUL (guaranteed universal life). So your point about unlimited downside and the policy potentially lapsing is INCORRECT. The death benefit is guaranteed, just like a GUL or a WL and the premiums are very competitive.

3) Your statement about, VUL's being only a little bit cheaper than WL. I don't know what VUL's you are quoting, or what you consider a little bit cheaper, but in my experience working with MET Life's WL and Hancock's WL and working with NY Life and NMFN agents, VUL is alot cheaper than WL, even with the DB Guarantee.

4)

You may understand them perfectly but do your clients understand them as well? Do they really understand that their policy may lapse in their 70s? Do they really understand that they can't touch their CSV with 2ndary guarantees? I ask because I haven't met ONE SINGLE VUL holder who understood these possibilities. 8 out of 10 permanent policies I come across are VULs and I NEVER tell them they have something "bad". I only ask them if they understand the risk they are taking and they all look at me like a deer in a headlight

Yes my clients understand. New VUL's have guarantees and you can take out money without affecting the guarantees. The fact that you haven't met ONE SINGLE VUL holder who understands what they have is not a surprise. Over 60% of clients don't understand what they have, regardless of whether it's WL, UL, Term, VUL, etc.

By the way I like all of these products. I'm not bashing any product. So, I'm not here as the VUL GUY. I just don't believe that you can generalize and just say that VUL is bad in all cases. Alot of advisors don't understand the new VUL's or are not aware.