Exit Strategy for EIULs

Apr 4, 2018

  1. DHK
    Offline

    DHK "YOU CAN'T HANDLE THE TRUTH!"

    Posts:
    7,593
    Likes Received:
    1,349
    State:
    California
    It's a good question, and I know the answer. It's all about NAIC and securities regulations that govern how illustrations work regarding indexed life insurance.

    The 3% is the minimum interest guarantee - assuming you allocate your funds to that, rather than an index. You'll notice there are 1 or 2 more columns with a given annual interest rate and how well your policy would do if that amount was credited every year.

    As we've already discussed, the likelihood of that happening is essentially none. But it's there because it has to conform to NAIC insurance regulations, so it's there.

    That's the standard. There are some other companies that will let the agent VARY the amount of interest credited to show in the illustration (such as 0% for two years, then max interest for 3 years and alternating that scenario), but even that isn't quite right because cap rates change as interest rates fluctuate.

    Also, NAIC (and probably securities laws) would not allow for a true "back-testing" of S&P 500 (or any other index) performance to show what would've REALLY happened if you bought the policy 20 years ago. Too many moving parts AND the money is not actually invested in the index. To keep it "safe", it's best not to make that actual comparison in a regulated illustration.

    Illustrations help us understand the nature of the policy, but certainly cannot predict the future.

    I hope this helps some.
     
    DHK, Apr 4, 2018
    #11
  2. js44
    Offline

    js44 Expert

    Posts:
    81
    Likes Received:
    2
    State:
    Illinois
    The strange thing is that I tried to replace the index returns with extra premium till 100 so every year there is 6% credit but it still lapses. So, it's designed to take only Index returns and that is strange.
    As an analogy, slot machine is designed to pay out now and then and I am feeding it with my coins. Now, it's almost time to pay out and I run out of coins and I borrow from my friend BUT it does not pay out now as they are not my coins just like it's not Index returns but my extra premiums.
    You see my point?
     
    js44, Apr 4, 2018
    #12
  3. Justin Bilyj
    Offline

    Justin Bilyj Guru

    Posts:
    4,981
    Likes Received:
    101
    State:
    Ohio
    Which company's IUL is it if you don't mind me asking?
     
  4. js44
    Offline

    js44 Expert

    Posts:
    81
    Likes Received:
    2
    State:
    Illinois
    They are all the same but I downloaded the software from Ohio National site.
     
    js44, Apr 4, 2018
    #14
  5. js44
    Offline

    js44 Expert

    Posts:
    81
    Likes Received:
    2
    State:
    Illinois
    To get back to the topic of this thread. What happens if I just decide to cancel my policy after seeing Index return less than 3% for three straight years? I understand I will get CV minus any surrender charges but will there be any tax? and how is it calculated? will the insurance company calculated and send an 1099?
     
    js44, Apr 4, 2018
    #15
  6. DHK
    Offline

    DHK "YOU CAN'T HANDLE THE TRUTH!"

    Posts:
    7,593
    Likes Received:
    1,349
    State:
    California
    DHK, Apr 4, 2018
    #16
  7. js44
    Offline

    js44 Expert

    Posts:
    81
    Likes Received:
    2
    State:
    Illinois
    I like the guarantees of WL and Indexing of EIUL to the market. Maybe Mass Mutual will come out with a better EIUL or maybe there is already something like that but in a nutshell, that's what people want. Have a good one!
     
    js44, Apr 4, 2018
    #17
  8. DHK
    Offline

    DHK "YOU CAN'T HANDLE THE TRUTH!"

    Posts:
    7,593
    Likes Received:
    1,349
    State:
    California
    DHK, Apr 4, 2018
    #18
  9. Justin Bilyj
    Offline

    Justin Bilyj Guru

    Posts:
    4,981
    Likes Received:
    101
    State:
    Ohio
    Mass is whole life, they don't do indexed products..
     
  10. js44
    Offline

    js44 Expert

    Posts:
    81
    Likes Received:
    2
    State:
    Illinois
    Thanks, I will look into it. Btw, is it possible to have access to Midland/NA software to check out myself?
     
    js44, Apr 4, 2018
    #20
Loading...