Corey
Expert
+1
Clients always seem to ask: "What happens to your cash value?" It's a good idea to go into some detail about the difference in options.
Don't forget, there's also an option C.
Option A vs. B in UL
- Thread starter Survivor
- Start date
+1
Clients always seem to ask: "What happens to your cash value?" It's a good idea to go into some detail about the difference in options.
Don't forget, there's also an option C.
- 403
A few carriers only have Option A = level death benefit.
Most have Option A (=level) & Option B (death benefit = level face + cash value)
A few have Option C (death benefit = level face + sum of premiums), more common for variable than regular UL
If terminally ill switches A to B, carriers usually cut the face so the death benefit stays at the same level at time of switch. Although this yields an increasing death benefit as cash value rises, virtually all insurers make more on the cash value than the interest they credit. So if the insured starts dumping in cash, they make more on that cash.
If the insured stops paying premium, charges might cut into the cash, but the risk to the insurer stays the same on Option B. If the terminal insured is on Option A, the cash might drop (e.g., due to COI charges), but the death benefit is constant, so the risk to the carrier goes up. But most carriers don't encourage the switch to B for terminal insureds, because it isn't a priority (and, for some, because they haven't figured out that it's a better deal for the carrier as well as most insureds).
Most have Option A (=level) & Option B (death benefit = level face + cash value)
A few have Option C (death benefit = level face + sum of premiums), more common for variable than regular UL
If terminally ill switches A to B, carriers usually cut the face so the death benefit stays at the same level at time of switch. Although this yields an increasing death benefit as cash value rises, virtually all insurers make more on the cash value than the interest they credit. So if the insured starts dumping in cash, they make more on that cash.
If the insured stops paying premium, charges might cut into the cash, but the risk to the insurer stays the same on Option B. If the terminal insured is on Option A, the cash might drop (e.g., due to COI charges), but the death benefit is constant, so the risk to the carrier goes up. But most carriers don't encourage the switch to B for terminal insureds, because it isn't a priority (and, for some, because they haven't figured out that it's a better deal for the carrier as well as most insureds).
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