Converting Whole Life to Universal Life

[blue_wynd]

So I have some WFG people trying to recruit me and at the same time telling me to convert the whole life product with one of the big 4 mutual life companies I brought a few years back into an IUL. Basically the shill is bigger cash value growth with the IUL and how whole life is low returns.

So skipping the keeping insurance and investments separate, what are you life gurus view on it?

Mine view is although the rate of return on the whole is low, it is slow and steady. I view it as the bonds component of my portfolio after maxing out my ira. That am I am not entirely sure how the mortality expenses will eat into the cash value like the variable UL of the days before. I don't have the concern with whole life.

So what is your view with whole life vs IUL?

 

[DHK]

First, it's not a conversion. It's a replacement. You would still have to qualify medically for the new policy. Yes, you can do a 1035 exchange with the cash values... but it's still not a conversion.

As far as WL vs IUL... for every year that IUL does NOT have a return, WL will. If IUL has 10% then 0%... and WL have 5% for 2 years... you're about even. That's why, overall, it won't matter long-term based on caps/floors, etc.

Now, I may have to amend my thoughts based on uncapped index interest crediting options, but overall, you already have the policy. Keep it.

Second, as far as costs between WL and IUL... there is a disclosure difference between fixed (bundled) and flexible (unbundled) premium contracts. But if you try to stop making payments on your WL, even with APLs, you'll still have to maintain your 'costs of insurance' that are wrapped in your entire premium.

The problem of UL in the 80's was that it was sold improperly. It was "get whole life for half the cost." They were improperly funded, which led to policy implosions. It wasn't the costs alone.

If your WL policy is structured properly with plenty of PUA riders (cash dump-ins), I wouldn't change it.

Also... this is a BIG indication of people giving advice without truly understanding what they are doing. Are you sure you want to be affiliated with them?

 

[blue_wynd]

First, it's not a conversion. It's a replacement. You would still have to qualify medically for the new policy. Yes, you can do a 1035 exchange with the cash values... but it's still not a conversion.

I meant replacement, don't know why I put conversion. I know there is another paramed. I don't plan on replacing, will get a new iul if I go that route. So doing the little reading on the life forums here, keep the DB at option A. Increase the premium without MECing and change the DB to option B later? When should I change to option B on the IUL?

Or what is the best way to get the most out of an IUL?

 

[DHK]

Look up scagnt83's posts on gpt and cvat. Those will help you the best.

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BTW, option b helps you put in more cash faster.

 

[Tahoe Ray]

I meant replacement, don't know why I put conversion. I know there is another paramed. I don't plan on replacing, will get a new iul if I go that route. So doing the little reading on the life forums here, keep the DB at option A. Increase the premium without MECing and change the DB to option B later? When should I change to option B on the IUL?

Or what is the best way to get the most out of an IUL?

B to A. Not A to B. GPT testing.

 

[blue_wynd]

I guess B is the level DB? Only remember level than to increasing.

 

[Tahoe Ray]

I guess B is the level DB? Only remember level than to increasing.

Other way around...increasing to level.

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Other way around...increasing to level.

When you run an illustration, some carriers will have a "2 to 1 (B to A) optimal switch" option. Pick that one.

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Other way around...increasing to level.

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When you run an illustration, some carriers will have a "2 to 1 (B to A) optimal switch" option. Pick that one.

And choose GPT testing w/ min non-mec DB. Different carriers will have different nomenclature so you'll need to figure out what each carrier's optimal design looks like.

If you don't have a good BGA who will design these for you, I would call the carrier's support desk and ask how to best illustrate a max cash/loan scenario.

 

[Lloyds of Lubbock]

You are also taking your accumulated cash value and subjecting it to surrender charges.
How old is your whole life, is it a limited pay?
What carrier was it written with?
You also have a new contestability period.

 

[pfg1]

I wouldn't do it. If you want and IUL, get one in addition to your WL. And not through WFG. LOL