Any VUL experts?

I have yet to come across a case where VUL was good for the client or the agent. Insurance companies, however, LOVE VUL. Why? It's all in the way the policy is designed. There are two main parts: The Investments, and the Cost of Insurance (COI). Your premium each month/quarter/year gets split between the two. Let's break them down a bit. The investments are in subaccounts, much like you'd see in a Variable Annuity. They carry underlying fund expenses, administrative charges, and M&E. However, what isn't known is that every time you make a deposit into the subaccounts, a maximum sales charge is taken out as well. In other words, it's like you don't get a break point for buying in bulk. The COI is based on Annual Renewable Term insurance. Every year, the cost goes up based on the insured's age. If you look at a graph of ART, the cost is generally managable the younger you are, but after 10 years, the costs go up exponentially. So, let's say you're putting $500/month towards a policy. If the subaccount expenses stay the same, theoretically more of your deposit each month will go to the COI. The VUL peddlers would say, "Well, your investments will go up by X%, which will counteract the effect of your values going down because the COI is going up." In theory, this is correct. If you get, say, 8% year over year, this will keep the policy afloat. However, we all know investments don't work that way. When you have a few down years, the rising COI costs (plus the fact that the insurance company can raise overall expenses) makes VUL the most expensive version of BTID there is. Bottom line, I've seen literally hundreds of VUL policies on the verge of collapse. Some of them being overfunded (as is recommended by the more client-friendly agent). I have yet to see a VUL do what was theorized. Not one. Not only that, the agent has to do a ton of service work regularly to make sure policy values are holding up the cost of insurance and death benefit. Otherwise, you run the risk of losing the CSV and the DB. In other words, bad for the agent (less productive), bad for the client (potential loss of premiums and DB), but great for the insurance company (use of paid premiums over time AND no need to pay a DB at death). Now, don't misunderstand - I love permanent insurance. I love what it can do for clients, and for me as a policy holder and agent. I would rather have one less thing to worry about and give my clients protection, promises, and guarantees. NONE of those are available in VUL, and to a lesser extent, UL. These are only available in Whole Life insurance. Let the flame wars BEGIN!
Guess you've never heard of Guaranteed Universal Life :) so many guarantee's that it even has it in the name ;)
 
Non-Lapse GUL has ONE guarantee: level premium for a given amount of life insurance death benefit.

As this thread is about cash value life insurance, and non-lapse GUL is not built for accumulating cash values... your comment makes me wonder.
 
I have yet to come across a case where VUL was good for the client or the agent. Insurance companies, however, LOVE VUL. Why? It's all in the way the policy is designed. There are two main parts: The Investments, and the Cost of Insurance (COI). Your premium each month/quarter/year gets split between the two. Let's break them down a bit.

The investments are in subaccounts, much like you'd see in a Variable Annuity. They carry underlying fund expenses, administrative charges, and M&E. However, what isn't known is that every time you make a deposit into the subaccounts, a maximum sales charge is taken out as well. In other words, it's like you don't get a break point for buying in bulk. The COI is based on Annual Renewable Term insurance. Every year, the cost goes up based on the insured's age. If you look at a graph of ART, the cost is generally managable the younger you are, but after 10 years, the costs go up exponentially.

So, let's say you're putting $500/month towards a policy. If the subaccount expenses stay the same, theoretically more of your deposit each month will go to the COI. The VUL peddlers would say, "Well, your investments will go up by X%, which will counteract the effect of your values going down because the COI is going up." In theory, this is correct. If you get, say, 8% year over year, this will keep the policy afloat. However, we all know investments don't work that way. When you have a few down years, the rising COI costs (plus the fact that the insurance company can raise overall expenses) makes VUL the most expensive version of BTID there is.

Bottom line, I've seen literally hundreds of VUL policies on the verge of collapse. Some of them being overfunded (as is recommended by the more client-friendly agent). I have yet to see a VUL do what was theorized. Not one. Not only that, the agent has to do a ton of service work regularly to make sure policy values are holding up the cost of insurance and death benefit. Otherwise, you run the risk of losing the CSV and the DB. In other words, bad for the agent (less productive), bad for the client (potential loss of premiums and DB), but great for the insurance company (use of paid premiums over time AND no need to pay a DB at death).

Now, don't misunderstand - I love permanent insurance. I love what it can do for clients, and for me as a policy holder and agent. I would rather have one less thing to worry about and give my clients protection, promises, and guarantees. NONE of those are available in VUL, and to a lesser extent, UL. These are only available in Whole Life insurance.

Let the flame wars BEGIN!

I don't have a problem with a VUL. I think it's a good product. The problem is likely how it is sold. The customer should know that they are investing in the market. In times of rising equity markets VULs perform excellent.

VULs illustrate the outcomes achieved by the Buy Term Invest The Difference camps in a single consolidated vehicle. It's up to the customer to decide if they want to roll the dice where there family's security is concerned.
 
I've always felt that the cash values of life insurance should reflect more of the fixed portion of the clients overall folio. But that's me.

(I realize the cash values of a mutual company are not necessarily fixed - but that's how I characterize them)
 
VUL versus WL arguments never end. I started liking WL, switched to VUL for awhile now only sell VUL when it is necessary. The best argument for VUL is for a wealthy family who buys a child policy. With WL, the best rate of return you can get it is whatever the government bond rate is over the long term. With VUL you can potentially get a higher rate of return if we are comparing life expectancy of about 85 for a child. There is a good chance the market will outperform government bonds over a 85 year period.

The other pro for VUL is that you can adjust the portfolio anyway you want and pay no taxes on portfolio reallocation. VUL can complement a taxable portfolio and reduce taxes on reallocation transactions. WL can also complement a taxable portfolio but it is more limited.
 
He said -

I would rather have one less thing to worry about and give my clients protection, promises, and guarantees. NONE of those are available in VUL, and to a lesser extent, UL. These are only available in Whole Life insurance.

Let the flame wars BEGIN!

You said GUL has many guarantees in post #11. GUL essentially has ONE guarantee - low annual premiums due every year to secure a given death benefit.

BTW, DCFT was one of the most knowledgeable posters on this forum. Don't kow what happened to him, but he was good.
 
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