Hello helpers,
I was recently introduced into a newer product EIUL (Equity Indexed Universal Life) of Pacific Life. I think the upside is 11% and protection at no loss when SPX (S&P 500) lost.
Looking at the cost structure illustration, I understand that there are (i) Admin + Rider cost (ii) Agent Commission (labelled as Premium Loads) (iii) Coverage Charge and (iv) Term Ins. The most expensive in the earlier years was this Coverage Charge, at total $22K in 10 years. Term Ins would eventually be a lot more expensive when I start to forget changing my diapers.
Anyway, here is my situation. I am 39, and in excellent health (plus category), and I have about USD$120K to invest. I asked for $500K Initial Death Benefits, and I can fully front-load that total $120K premium with Over-Funding in 3.5 years which is the minimal duration allowed by law. The reason I am looking at EIUL is to diversify from my current risky investment portfolio. As you know, $100K in bank is still $100K if I die in 10 years. Additionally, I would never touch the money in at least next 10 years, possibly much longer.
Here are what I want to achieve:
1) Some growth of the $120K without downside risk. This case is validated by EIUL downside protection.
2) Critically important, is I would definitely withdraw money from this policy more than 10 years later, for whatever reason. For kids education, or retirement slow-yearly-withdrawal.
3) I definitely do not want the policy to lapse and end up with big tax liability! So if I borrow it, I would pay back. But I am more looking at it as a withdrawal for retirement fund, as point 2 above.
I need your help in clarifying the following doubts. These products seems WONDERFUL, but as I learned growing up, there is NO FREE LUNCH.
1) I understand that these "non-guarantee" returns and protections, is NON-Guaranteed. Mainly, the Caps (growth cap and downside cap), and the Term Ins cost at old ages (e.g. illustration show $3100 cost at age 70). Given your decades of experiences across many companies, what criteria should I use to evaluate the chances of Insurance Companies willy-nilly changing these terms conditions?
Rating Strength? Word of Mouth? The later is difficult to gauge due to conflict-interest.
A helpful sample point here would be, what was the 10-years ago Term-Life cost for an old guy age 70, versus what is the cost now.
Or among those EIUL plans since 10 years ago, how many have changed their caps and cost to the detriment of the insured?
2) I understand that the withdrawal would incur some cost to the cash value of the plan, and I must not withdraw more than $100K in total or else I would start to pay some income tax. I also understand that withdrawal would reduce my cash value and hence affect the credit interest (SPX growth) of next year, while my account has to pay for the annual Term Ins. No worry, I can look at the yearly cash flow and cost and decide the withdrawal amount.
But I would like to know, asides from the notes above, what typical cost am I looking at when I make Withdrawal? Believe me, the agent could not give me the cost break-down after 2 weeks. This is why I am here.
3) Given Negative Interest Rates, and god forbid if SPX record 5 years of straight loss once I buy in, would the company come haunting me to pay higher premiums after 5 years, even if I already paid it full with over-funding at total $120K premiums in 3.5 years? Which part of the plan or specific terms would mention this?
Thanks Much!
Aaron
I was recently introduced into a newer product EIUL (Equity Indexed Universal Life) of Pacific Life. I think the upside is 11% and protection at no loss when SPX (S&P 500) lost.
Looking at the cost structure illustration, I understand that there are (i) Admin + Rider cost (ii) Agent Commission (labelled as Premium Loads) (iii) Coverage Charge and (iv) Term Ins. The most expensive in the earlier years was this Coverage Charge, at total $22K in 10 years. Term Ins would eventually be a lot more expensive when I start to forget changing my diapers.
Anyway, here is my situation. I am 39, and in excellent health (plus category), and I have about USD$120K to invest. I asked for $500K Initial Death Benefits, and I can fully front-load that total $120K premium with Over-Funding in 3.5 years which is the minimal duration allowed by law. The reason I am looking at EIUL is to diversify from my current risky investment portfolio. As you know, $100K in bank is still $100K if I die in 10 years. Additionally, I would never touch the money in at least next 10 years, possibly much longer.
Here are what I want to achieve:
1) Some growth of the $120K without downside risk. This case is validated by EIUL downside protection.
2) Critically important, is I would definitely withdraw money from this policy more than 10 years later, for whatever reason. For kids education, or retirement slow-yearly-withdrawal.
3) I definitely do not want the policy to lapse and end up with big tax liability! So if I borrow it, I would pay back. But I am more looking at it as a withdrawal for retirement fund, as point 2 above.
I need your help in clarifying the following doubts. These products seems WONDERFUL, but as I learned growing up, there is NO FREE LUNCH.
1) I understand that these "non-guarantee" returns and protections, is NON-Guaranteed. Mainly, the Caps (growth cap and downside cap), and the Term Ins cost at old ages (e.g. illustration show $3100 cost at age 70). Given your decades of experiences across many companies, what criteria should I use to evaluate the chances of Insurance Companies willy-nilly changing these terms conditions?
Rating Strength? Word of Mouth? The later is difficult to gauge due to conflict-interest.
A helpful sample point here would be, what was the 10-years ago Term-Life cost for an old guy age 70, versus what is the cost now.
Or among those EIUL plans since 10 years ago, how many have changed their caps and cost to the detriment of the insured?
2) I understand that the withdrawal would incur some cost to the cash value of the plan, and I must not withdraw more than $100K in total or else I would start to pay some income tax. I also understand that withdrawal would reduce my cash value and hence affect the credit interest (SPX growth) of next year, while my account has to pay for the annual Term Ins. No worry, I can look at the yearly cash flow and cost and decide the withdrawal amount.
But I would like to know, asides from the notes above, what typical cost am I looking at when I make Withdrawal? Believe me, the agent could not give me the cost break-down after 2 weeks. This is why I am here.
3) Given Negative Interest Rates, and god forbid if SPX record 5 years of straight loss once I buy in, would the company come haunting me to pay higher premiums after 5 years, even if I already paid it full with over-funding at total $120K premiums in 3.5 years? Which part of the plan or specific terms would mention this?
Thanks Much!
Aaron