Comparing Universal Life Policies

[tzurba]

I currently have several fixed universal life policies with LSW for myself and my family. I have a new insurance agent. When she looked over these policies she seemed to be shocked over the fees that they are charging. For example, on my policy with a yearly premium of $9500.00, there are expense charges of a little over $4000.00 per year. She has suggested a fixed universal life policy from F&G where the expense charges are much lower. Does anyone have experience with these products?

 

[STIBROKER]

I currently have several fixed universal life policies with LSW for myself and my family. I have a new insurance agent. When she looked over these policies she seemed to be shocked over the fees that they are charging. For example, on my policy with a yearly premium of $9500.00, there are expense charges of a little over $4000.00 per year. She has suggested a fixed universal life policy from F&G where the expense charges are much lower. Does anyone have experience with these products?

I would look into guaranteed ul's that lock your rates in to 121.....and could keep more cash in your pocket....

 

[BNTRS]

How old are the policies and what fees are we looking at?

UL typically has 3 basic charges Admin, Premium, and Cost of Insurance.

There's also a surrender charge, but that only applies if you surrender the policy or take a withdrawal beyond the free withdrawal period. The surrender charge also only applies for a certain number if years following the issue of the policy (e.g. 10 years after issue, and it grades down from there, some are longer and some are shorter).

It's possible a lot of your premium is going to fees, what is the death benefit? Also, is the death benefit level or increasing, and what DEFRA/TEFRA test was used for your policy. Holy what? If you have an illustration, somewhere on the illustration you should see either CVAT (Cash Value Accumulation Test) or GPT (Guideline Premium Test). CVAT requires more death benefit relative to cash and comes with a slightly more expensive cost of insurance curve.

The even bigger question is, what's the goal? If it's purely death benefit focused, then fixed current assumption UL is a bad idea. Secondary Guaranteed UL (GUL) is a more appropriate option (no cash value though). If you want cash, but need to focus more on death benefit, whole life is the much more reliable and generally higher performing product.

If it's all about the cash and not really about the death benefit, this is where UL starts to make sense.

 

[tzurba]

How old are the policies and what fees are we looking at?

UL typically has 3 basic charges Admin, Premium, and Cost of Insurance.

There's also a surrender charge, but that only applies if you surrender the policy or take a withdrawal beyond the free withdrawal period. The surrender charge also only applies for a certain number if years following the issue of the policy (e.g. 10 years after issue, and it grades down from there, some are longer and some are shorter).

It's possible a lot of your premium is going to fees, what is the death benefit? Also, is the death benefit level or increasing, and what DEFRA/TEFRA test was used for your policy. Holy what? If you have an illustration, somewhere on the illustration you should see either CVAT (Cash Value Accumulation Test) or GPT (Guideline Premium Test). CVAT requires more death benefit relative to cash and comes with a slightly more expensive cost of insurance curve.

The even bigger question is, what's the goal? If it's purely death benefit focused, then fixed current assumption UL is a bad idea. Secondary Guaranteed UL (GUL) is a more appropriate option (no cash value though). If you want cash, but need to focus more on death benefit, whole life is the much more reliable and generally higher performing product.

If it's all about the cash and not really about the death benefit, this is where UL starts to make sense.

It looks like the death benefit is $787, 500. The monthly cost of insurance is less than $22.00. I have had the polict for about 5 years. Is there a website where I can research the DEFRA/TEFRA test for this policy?

 

[BNTRS]

It looks like the death benefit is $787, 500. The monthly cost of insurance is less than $22.00. I have had the polict for about 5 years. Is there a website where I can research the DEFRA/TEFRA test for this policy?

5 years means you're still very likely within the surrender period.

You can find information about TEFRA/DEFRA in general terms. When it comes specifically to your policies, you can simply contact the insurance company and ask them what test was used. If you're new agent is the servicing agent on these policies, you could always ask her to look it up as she'd have access to that information.

As for additional online resource, I happen to like this place when it comes to life insurance information. But I'm bias