Whole Life vs. Index Universal Life
- Thread starter leolu0930
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Re: Whole Life VS Index Universal Life
So every client should just pay 250% more in premium to make sure that if they forget to make a payment they will still be ok? Give people just a little tiny bit of credit that they can handle their own finances....you are also assuming that there will be $0 cash value in the policy. Many UL policies have performed very well over time and generated significant cash value that would keep the policy going for many years without any payments.
So every client should just pay 250% more in premium to make sure that if they forget to make a payment they will still be ok? Give people just a little tiny bit of credit that they can handle their own finances....you are also assuming that there will be $0 cash value in the policy. Many UL policies have performed very well over time and generated significant cash value that would keep the policy going for many years without any payments.
- 16,920
Re: Whole Life VS Index Universal Life
Which policies have performed very well over time? Two or three clients per month come to me with crashed UL policies. They have done nothing wrong as far as they're concerned. They made ALL their payments on time. And when the company had them increase premiums they did that too. But now the policies are STILL crashing after they have paid MANY thousands of dollars into them.
Call your state insurance commissioner as a consumer and tell them you have a UL policy that you think there is a problem with. The answer you will recieve is that is basically the nature of those policies.
I know the guaranteed UL is a newer version BUT they are designed to have NO cash value build up in the later years. There is no safety net. They are NOT the same as a straight whole-life policy.
They will always have a MUCH higher rate of dissatisfaction at the end of the policy than whole-life. That is undisputable.
I have and will ALWAYS advise any client I sell one to to overfund it.
Which policies have performed very well over time? Two or three clients per month come to me with crashed UL policies. They have done nothing wrong as far as they're concerned. They made ALL their payments on time. And when the company had them increase premiums they did that too. But now the policies are STILL crashing after they have paid MANY thousands of dollars into them.
Call your state insurance commissioner as a consumer and tell them you have a UL policy that you think there is a problem with. The answer you will recieve is that is basically the nature of those policies.
I know the guaranteed UL is a newer version BUT they are designed to have NO cash value build up in the later years. There is no safety net. They are NOT the same as a straight whole-life policy.
They will always have a MUCH higher rate of dissatisfaction at the end of the policy than whole-life. That is undisputable.
I have and will ALWAYS advise any client I sell one to to overfund it.
- 1,802
Re: Whole Life VS Index Universal Life
The majority of UL policies that are crashing right now were sold between the late 70's and late 80's.
During this time inflation was a major problem, and interest rates were sky high. Companies/ Agents were illustrating polices with interest rates averaging 12-19%; while the guarantees were only at 4%. I am sure you would agree that most companies will not allow these type of illustrations anymore; for obvious reasons.
As Dgoldenz has said, and I completely agree, UL policies do accumulate cash value if sold correctly. The amount of CV is obviously determined by the crediting method inside the UL policy, and the amount of premium being paid by the customer.
Scaring somebody into thinking that if they miss one payment with their UL that they will lose their DB is absurd, and borderline fraud.
If the customer is paying the minimum premiums then this is correct in most instances. To assume that every UL policy holder is paying the minimum premiums is ridiculous.
What if you missed a payment on your term policy? Same concept!
This is all dependant upon the premiums in which the insured pays; hence the term "Flexible Premium Universal Life policy."
As it was said many agents do not fully understand how a UL policy works. This in itself is one of the major flaws in our industry; an agent does not have to understand how it works to sell it.
Par/ Non Par WL, Term, UL, and VUL's are all good solutions, but they have to be used in the right way. Great discussion!
The majority of UL policies that are crashing right now were sold between the late 70's and late 80's.
During this time inflation was a major problem, and interest rates were sky high. Companies/ Agents were illustrating polices with interest rates averaging 12-19%; while the guarantees were only at 4%. I am sure you would agree that most companies will not allow these type of illustrations anymore; for obvious reasons.
As Dgoldenz has said, and I completely agree, UL policies do accumulate cash value if sold correctly. The amount of CV is obviously determined by the crediting method inside the UL policy, and the amount of premium being paid by the customer.
Scaring somebody into thinking that if they miss one payment with their UL that they will lose their DB is absurd, and borderline fraud.
If the customer is paying the minimum premiums then this is correct in most instances. To assume that every UL policy holder is paying the minimum premiums is ridiculous.
What if you missed a payment on your term policy? Same concept!
This is all dependant upon the premiums in which the insured pays; hence the term "Flexible Premium Universal Life policy."
As it was said many agents do not fully understand how a UL policy works. This in itself is one of the major flaws in our industry; an agent does not have to understand how it works to sell it.
Par/ Non Par WL, Term, UL, and VUL's are all good solutions, but they have to be used in the right way. Great discussion!
Re: Whole Life VS Index Universal Life
I think insuranceexec summed it up pretty well. We have many clients that have generated a significant amount of cash value with their UL policies, some currently over six figures in surrender value. It is a little short-sighted to say that clients will be dis-satisfied. How many of those clients saved $50k or $100k or $200k over the course of time by purchasing the UL instead of the whole life?
I think insuranceexec summed it up pretty well. We have many clients that have generated a significant amount of cash value with their UL policies, some currently over six figures in surrender value. It is a little short-sighted to say that clients will be dis-satisfied. How many of those clients saved $50k or $100k or $200k over the course of time by purchasing the UL instead of the whole life?
- 16,920
Re: Whole Life VS Index Universal Life
I guess in 20-more years we'll know for sure.
I guess in 20-more years we'll know for sure.
- 1,802
Re: Whole Life VS Index Universal Life
You are correct. If all the companies go out of business, then we will not have anything to argue about........LOL
You are correct. If all the companies go out of business, then we will not have anything to argue about........LOL
Re: Whole Life VS Index Universal Life
Fat Chance....
It will take a bigger event than ALL the life ins cos going out of business, for this group to have nothing to argue about.
Fat Chance....
It will take a bigger event than ALL the life ins cos going out of business, for this group to have nothing to argue about.
- 1,802
Re: Whole Life VS Index Universal Life
Good point!Fat Chance....
It will take a bigger event than ALL the life ins cos going out of business, for this group to have nothing to argue about.
Ami
Expert
Re: Whole Life VS Index Universal Life
The question is not whether responsible people can handle their own finances properly and in a timely manner but whether the unexpected (isn't that what insurance is for?) will interfere. For example, see the article on the Harvard study at Medical Bills Leading Cause of Bankruptcy, Harvard Study Finds
[snip]
Most of the medical bankruptcy filers were middle class; 56 percent owned a home and the same number had attended college. In many cases, illness forced breadwinners to take time off from work -- losing income and job-based health insurance precisely when families needed it most.
Families in bankruptcy suffered many privations -- 30 percent had a utility cut off...
[/end snip]
One of the facts of life with critical illness is that its impact - economic and otherwise - extends beyond the victim. As noted in an earlier posting, premature death often follows a period of critical illness.
Having noted that, however, this I'm not suggesting that "whole life" is necessarily a better choice than UL, particularly during the 'early' years.
IMO, one good approach to comparative quantitative evaluations is to examine the respective IRR of the compared products over the years. Comparative IRR evaluations can be done for the DB as well as the CSV and can easily be done on a year by year basis.
The question is not whether responsible people can handle their own finances properly and in a timely manner but whether the unexpected (isn't that what insurance is for?) will interfere. For example, see the article on the Harvard study at Medical Bills Leading Cause of Bankruptcy, Harvard Study Finds
[snip]
Most of the medical bankruptcy filers were middle class; 56 percent owned a home and the same number had attended college. In many cases, illness forced breadwinners to take time off from work -- losing income and job-based health insurance precisely when families needed it most.
Families in bankruptcy suffered many privations -- 30 percent had a utility cut off...
[/end snip]
One of the facts of life with critical illness is that its impact - economic and otherwise - extends beyond the victim. As noted in an earlier posting, premature death often follows a period of critical illness.
Having noted that, however, this I'm not suggesting that "whole life" is necessarily a better choice than UL, particularly during the 'early' years.
IMO, one good approach to comparative quantitative evaluations is to examine the respective IRR of the compared products over the years. Comparative IRR evaluations can be done for the DB as well as the CSV and can easily be done on a year by year basis.
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