A Universal Life Dilema....

[zmcpherson]

Im a 27 year old non smoker with a great job making 85k/year+. Im not married and have no kids but I figure should start saving for the future as well as possibly looking into life insurance.

I came across Universal Life insurance in my research and it sounds great. Death benefit, cash loans, flexible, great payouts, guaranteed minimums every year.

So I met with an Aviva rep to discuss a few possible packages and she made it sound even more "to good to be true" then my initial research indicated which is making me kind of unsettled.

Im supposed to meet with her again this Thursaday, what are some more questions I can ask her to find out if Aviva is the right company to go through? Are there any deal breakers that I should be aware of that would indicate that either the ULI policy is not for me or that Aviva is not the company that I should be going through?

I did more research on Aviva compared to a few other companies such as North American Life, Penn Fed, and Allianz - and it seems that these other companies are a little more favored then Aviva as far as returns are considered. What would make these companies a better option than Aviva and does anyone know the actual hard numbers of fixed rate, the guaranteed rate, the cap rate, and the loan rate for these companies?

I have a background in accounting and finance so feel free to lay it down on me. The more physical numbers I have the easier it will be to make a more informed decision. And of course I am open to any and all commentary and discussion as well.

Thanks guys in advanced.

 

[VolAgent]

Do you have an illustration?

If you could remove your personal information and post it, that would be great. The more you give us to compare against, the better.

How the policy is designed regarding premiums versus death benefit will have a lot of impact. Potentially even more than which company you use.

 

[STIBROKER]

I came across Universal Life insurance in my research and it sounds great. Death benefit, cash loans, flexible, great payouts, guaranteed minimums every year..

If you do not know what you are doing with a UL it can be the worst move to make....better off buying a guaranteed ul......

Universal life insurance: Life insurance that comes to a dead end - Los Angeles Times

In Mendel's case, he said, there was no way a universal life insurance policy with only a $25 monthly payment would go the distance.
"This policy was underfunded when he bought it," Minkin said. "It was designed to crash and burn at some point."
That's deliberate. Policies like these are intended to protect you while you still have kids to put through school and a mortgage to pay. They aren't designed to serve as long-term coverage.
Mendel said he can't recall what his broker told him when he bought the policy 23 years ago. But he doesn't remember being told that his insurance would begin to disintegrate after a couple of decades.

 

[zmcpherson]

So Aviva is offering a 2% minimum if the market is flat for 5 straight years with a cap at 11%

Here is one of the reports she gave me (its a 1000 a month and retire at 50):

mediafire.com/?ci7cds6v952q642

She also gave me one at $700, $500, and $300 and retire at 55, 57, 60 (8 different sheets total)... those are hard copies which is why im not posting those.

As far as the guaranteed life policy goes, I found a similar article and showed it to her and she says that it is in the contract of the ULI that the premiums could never raise then the amount that I sign in for. However, they could lower if I decide that I want a lower benefit.

Though these numbers do look decent to retire on now, obviously the value of 60k a year fixed income 30 years from now will be no where near what it is today. Are IRA's, Roth IRA's, ULI's, Etc. really even worth investing in currently? Or would I do better using that 1k a month and putting it towards a mortgage on a house?

 

[Arthur Rudnick]

At your age and income, you should also consider a Participating Whole LIfe Policy.

Your Aviva agent only represents Aviva. You need to deal with an independent agent who represents a number of companies in your state.

There are a lot of moving parts in a Permanent Life Insurance Policy and you need to do your homework before you buy. You do not want to make a mistake.

 

[zmcpherson]

It is my understanding that whole life has higher premiums to ensure the "safety" of the policy from both higher future premiums and the possibility of collapse if a payment is missed.

It seems that most UL's after 2003 offer the same "locked in" premium maximum but also offers more flexibility of lowering payments if my income were to suddenly drop. The Aviva agent also assured me that she has seen a few of her clients miss out on a year a premiums without their policy collapsing.

Does this sound about right? And in your honest opinion, what would draw me more to a whole life policy over a universal life policy?

And im trying to do my homework, that's why I registered to an insurance forum : P

 

[Specialagent]

Why do you need life insurance?

 

[Arthur Rudnick]

And in your honest opinion, what would draw me more to a whole life policy over a universal life policy?

Generally, a UL policy is used for guaranteeing a death benefit & premium until the day you die. Yes, it can also be funded to build up a cash value, but people who purchase a UL, do not usually focus on the cash-value aspect.

With a Participating Whole Life Policy, dividends paid should be left in to buy additional "paid-up" insurance. If you look at a proposal, you will see that both the death benefit & cash value grows dramatically over the years.

You need to look at 3 different proposals:
1) UL
2) Non-Participating WL
3) Participating WL

Once you look at those, you'll have a much better idea as to what your options are, both in premium and coverage. Clearly, a Participating WL is the best choice, but it's also the most expensive.

If your Aviva rep can't show you all 3 proposals, find a new rep who can. There are a number of companies that sell whole life, both participating & non-participating including, but not limited to MetLife & Mass Mutual.

 

[STIBROKER]

life insurance is a lousy cash building tool...........do a search...you buy life insurance because you need life insurance......

 

[Arthur Rudnick]

life insurance is a lousy cash building tool

Scott,
At 27, in good health with no family and a pretty decent income, I disagree.

Look at an illustration for a Participating WL policy, with an initial death benefit of $500,000 and see where the death benefit and cash value will be in 30 years. That's assuming that he uses his dividends to purchase additional insurance

IMO, there is no better way to build up a HUGE sum of money.