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I'm not trying to discredit you so please don't take it the wrong way but have you ever sold a participating WL before?
Just Try to Understand Universal Life...
- Thread starter NoFault
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- universal life
I'm not trying to discredit you so please don't take it the wrong way but have you ever sold a participating WL before?
I know exactly how par WL works. Almost every single client I talk to is most concerned about getting the most death benefit for their dollar guaranteed for the longest period of time they can afford. Dividends are also not guaranteed. I like to work on guarantees, not the "trust me" factor.
What happens when you sell a par WL with $100k death benefit plus a term policy for $900k guaranteed for 20 or 30 years....and then the client has a heart attack but can't afford the cost of conversion to another WL policy 19 or 29 years down the line? Their out of pocket cost on the par WL may go down, but that doesn't matter if they can't afford to convert the rest of what they have and still need. If they've been getting PUA instead of putting dividends toward the premiums, they have a higher death benefit, but probably still lower than what they could have gotten on a no-lapse UL earlier, all while paying a much higher premium. It would take a while for PUA's to increase by 250-300% and match the original no-lapse UL death benefit.
It all comes down to what the client wants and can afford, but when presented both options, most clients want the no-lapse UL with higher death benefit. If they really want and are still stuck on the WL, I'll sell it to them.
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With due respect, this is why I still think you've never sold a par WL. How about a non-par WL (since we're only talking guarantees)? With expected mortality at 90, a non par WL paid up at 65 will blow a NLG UL away in total outlay and it still comes with all the non forfeiture options. For a 40 year old NL UL over against WL doesn't make much sense.
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Franz, which non-par WL policy are you looking at in your comparison?
- 25,061
Franz, could you put up some numbers and a company?
Par and non par
Thanks
Par and non par
Thanks
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I'm looking at JH NL UL vs JH Non Par WL paid up @65 for 40 year old male standard NT with expected mortality at 90. To be fair, NL UL would come out ahead if the insured dies before 75 but not after.
I'm really not trying to be a smart ass but only trying to point out the fact that the cheaper initial premium always costs more in the long run. Term is cheaper than NLGUL which is cheaper than Non Par WL which is cheaper than Par WL but when you compare total outlays at full lifetime Par WL comes out cheaper than Non Par WL which comes out cheaper than NLGUL which comes out cheaper than Term renewed until mortality. The more you pay upfront, the less you end up paying in totality. (Thought this was pretty common sense? Maybe not)
** For comparison to a par WL, I know it's unfair because we're talking non-guaranteed dividends but looking at MM WL at 100 basis below current projection the policy premium can be offset around year 18~19 and it will still project around 400K DB at mortality at 90. That's a huge difference in overall cost.
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It is common sense, but why would you want to pay more up front to save a little bit later? If you died 10 years in, you just spent all that extra money for no reason - you could have bought a policy with a higher death benefit for the same premium. Can you post some actual numbers on your comparison? Not to get too in-depth, but I would bet that if you considered total outlay at its present value, the no-lapse UL would be cheaper. The difference is even bigger when you have someone who qualifies for preferred plus rates, which many 40-year-olds do.
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Going by your comparison numbers, the $438k death benefit on the no-lapse UL is a pretty low estimate. A 35 year old male in standard health could get a $600,000 death benefit on a no-lapse UL with Aviva for $2967 per year (approximately the $250/month mentioned). That's a smidge more than $438k, and a big smidge more than $200k death benefit you're starting with. I am guessing the insured would not opt for a 40-year term policy since it's nearly the same premium as the UL, so let's say they bought a 30-year term policy for the $400k difference. That's another $60/month with SBLI, the cheapest 30-year term policy, bringing your total to $310/month for an initial $600k death benefit, and $345k death benefit in year 30 when the term expires (compared to the $600k still in force on the UL at the same premium). At $310/month, the 35 y.o. male could buy a no-lapse UL with a $750k death benefit. That's quite a bit more than the $431k death benefit at age 75 you're projecting on the par WL. At what point on that projection would the insured actually have a $750k death benefit with those projections? Age 95?
Have any numbers for a preferred plus 35 year old male?
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OK JH NLGUL total outlay at mortality at 90 = $110,716
JH Non Par WL paid up at 65 total outlay at mortality at 90 = $79,675.
Again NLGUL would still be cheaper before 75.
For superman preferred, you're right, NLGUL would still be cheaper up to age 87.
To be even more fair, if I run JH Non Par WL at full pay, NLGUL's total lifetime outlay comes out about 12% cheaper.
But even at 12% premium I think the non forfeiture option justifies the extra cost.
Again if I don't play fair and use par WL (which is what I sell for permanent 95% of the time), the difference in total outlay is too huge to mention.
