General UL Questions

Thank you sir. I guess I still don't understand why you say the insurance company NEVER keeps the cash value? If the insureds beneficiary does not get it and the company does not get it, who did? The insured intended to pay the target premium for twenty years years and then he was going to stop paying the premium and have the premium deducted from the cash value, but his master plan fell apart because he died. If he would have paid less each year, lets just say the coi he would have spent less and his beneficiary would have still gotten the same $250,000. If this is correct the only people who should buy option A are those that can see into the future and know the exact time of their demise.
 
The insurance company never keeps the cash value.

Death benefit = net amount at risk + cash values - any outstanding loans.

I think you're confusing face amount with death benefit. It's too easy (read: lazy) to think that the face amount is paid to beneficiaries so the insurance company keeps the cash values and deducts loan values from the face amount.

Perhaps a better term for me to use would be "Net Death Benefit".

Net Death Benefit = Face Amount (net amount at risk + cash values) - any outstanding loans.

Why do people buy permanent life insurance? It's not always to have the highest death benefit possible for the given premiums paid. Sometimes it's to have the LOWEST death benefit (to keep costs low) and maximize cash value growth with lowest costs. In such cases, option A may be the way to go. But you've got to play with the testing requirements (CVAT vs GPT, etc.) to determine which contract structure will work out best for using the policy during one's lifetime for purposes other than death benefit.

So, if you tell us what you want the policy to do, we can help you design it properly. There is no single right way to structure permanent insurance 100% of the time. However, there is generally a right way to structure permanent insurance depending on exactly what you want to accomplish for your client.

The attached PDF is a quick intro to UL and IUL. In the diagrams where it says "Insurance Protection", think of that part as the "net amount at risk".
 

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Thank you sir. I guess I still don't understand why you say the insurance company NEVER keeps the cash value? If the insureds beneficiary does not get it and the company does not get it, who did? The insured intended to pay the target premium for twenty years years and then he was going to stop paying the premium and have the premium deducted from the cash value, but his master plan fell apart because he died. If he would have paid less each year, lets just say the coi he would have spent less and his beneficiary would have still gotten the same $250,000. If this is correct the only people who should buy option A are those that can see into the future and know the exact time of their demise.

You are right, the company DOES keep the cash value under option A.

Death benefit - cash value = net amount of risk. The cost of insurance in a UL policy is based on the net amount of risk.
 
I don't see any discussion concerning administrative cost. I've seen UL policy go upside down because of those cost.
 
I agree. I just had a broker call me to try to sell his IUL. When I asked him to explain how the product worked he said it has a 100% participation and 1% guarantee. That's all I really needed to know. Hmm fascinating...Can the participation and cap change? How is it compared to 55% participation, no cap and 0% floor. What ages and underwriting classification does it perform at? Are you selling term insurance with it? How does the S&P index stack up to the global index? What age and uw classification do you fund as a five, seven or ten pay?
Whats scary is how many agents sell products that they know nothing about but convince themselves that it's a good deal. Example....the option A UL...It can be cheaper than the Option B and it may perform if you base your mortality off an illustration but life is funny that way....sometimes life doesn't imitate the illustration.
Just check some of topics in the IUL forum...such as "Is anyone selling IUL online" and you'll see what I mean.
 
I agree. I just had a broker call me to try to sell his IUL. When I asked him to explain how the product worked he said it has a 100% participation and 1% guarantee. That's all I really needed to know. Hmm fascinating...Can the participation and cap change? How is it compared to 55% participation, no cap and 0% floor. What ages and underwriting classification does it perform at? Are you selling term insurance with it? How does the S&P index stack up to the global index? What age and uw classification do you fund as a five, seven or ten pay?
Whats scary is how many agents sell products that they know nothing about but convince themselves that it's a good deal. Example....the option A UL...It can be cheaper than the Option B and it may perform if you base your mortality off an illustration but life is funny that way....sometimes life doesn't imitate the illustration.
Just check some of topics in the IUL forum...such as "Is anyone selling IUL online" and you'll see what I mean.

All of those things would be in the illustration(minus the X-pay questions). Who really has time to remember all of those things for each product?

The illustration will tell you how the S&P stacked up against the global index over set periods of time. It will then show you again how they performed over those same periods given the rate caps on the product.

Many products are sold with index segments that pay 100% participation. From what I have seen, only uncapped segments pay less, and that often makes them not worth it. If it was a VUL I get it, but it's an IUL, and indexes are tracked because they are generally stable.

I think your ages and UW question are a COI question? Who knows? Unless there is a company that does it for you, you would have to personally backtest each policy.

It's an interesting product. Honestly, I kind of like it.
 
I understand. When you sell the IUL how do the clients usually fund it? Is it the target premium, limited pay, etc? My question about the COI concerns the performance of the product. Example, the client wants $250,000 DB and also wants to save for future retirement, age 65. Is there an age that you find the IUL does not work very well?
 
I understand. When you sell the IUL how do the clients usually fund it? Is it the target premium, limited pay, etc? My question about the COI concerns the performance of the product. Example, the client wants $250,000 DB and also wants to save for future retirement, age 65. Is there an age that you find the IUL does not work very well?

So I'm new at this like you. I haven't sold one yet because I want to know what I'm doing. I've been at it for a week and I think I'm pretty close. At least when it comes to selling one to your AVERAGE consumer.

The true answer is "whatever they want". For some people looking for final expense whole life, a GIUL with ROP might be a better option if they just want small amounts of coverage and dont care about performance.

For some people looking for "term because it's the best" you may be able to get them a UL with a 10-20 year no lapse guarantee and have them pay minimum premium. You'll get a couple extra hundred dollars on your target premium.

How old is your client? For me, after age 40 unless you have tons of cash laying around you are not gonna get much from any type of UL. It takes 10-15 years before expenses come down and by then COI goes up.

Barring that, if they are building for retirement and average income they will have to probably buy $125K IUL and buy term for the difference. Otherwise COI will hurt them too much.
 
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