HELP! Variable Annuity Question/ Scenario

[adam3477]

I have a scenario/case that I need some help on. I met with a client today that has a Variable Annuity that is about 10 years old. It has a $1.5mm death benefit and the initial value 10 years ago was $150k. It is now worth around $88K.

That being said can I find him what he wants:

He wants a $1.5mm death benefit, and a guaranteed ROR of around 6-7% tied to either a fund or index(that doesnt really matter). He wants and underlying guarantee that whether the market is up or down, he is guaranteed his ROR. At the end of 10 years he wants it to be liquid.

Thanks in advance. FYI I am pretty new to the annuity market so if I am missing something here, just let me know and I will respond

 

[insuranceexec]

I have a scenario/case that I need some help on. I met with a client today that has a Variable Annuity that is about 10 years old. It has a $1.5mm death benefit and the initial value 10 years ago was $150k. It is now worth around $88K.

That being said can I find him what he wants:

He wants a $1.5mm death benefit, and a guaranteed ROR of around 6-7% tied to either a fund or index(that doesnt really matter). He wants and underlying guarantee that whether the market is up or down, he is guaranteed his ROR. At the end of 10 years he wants it to be liquid.

Thanks in advance. FYI I am pretty new to the annuity market so if I am missing something here, just let me know and I will respond

How did he get to the 1.5 mil DB if the initial value or deposit was 150K. Are you sure this is not a VUL?

With the above being said a guaranteed ROR in the 6-7% range is impossible; unless you are referring to an income annuity with a guaranteed DB roll-up.

The highest rate I have seen as of late in a True Fixed Annuity is 5.4% for 10 years. This will not provide any death benefit above the initial deposit.
I hope this helps..............

Are you a captive agent? What companies are you representing?

 

[adam3477]

no i am not captive... he is saying it is a variable do you think that was possible 10 years ago? just not available now B/C of the market?

 

[gzpxyj]

I have a scenario/case that I need some help on. I met with a client today that has a Variable Annuity that is about 10 years old. It has a $1.5mm death benefit and the initial value 10 years ago was $150k. It is now worth around $88K.

That being said can I find him what he wants:

He wants a $1.5mm death benefit, and a guaranteed ROR of around 6-7% tied to either a fund or index(that doesnt really matter). He wants and underlying guarantee that whether the market is up or down, he is guaranteed his ROR. At the end of 10 years he wants it to be liquid.

Thanks in advance. FYI I am pretty new to the annuity market so if I am missing something here, just let me know and I will respond

Fist there is no way for the initial 150K cash to get 1.5 million DB for an annuity, even with garanteed roll up every year. But for UL or VUL, possible. He must have purchased a lump sum premium UL, not annuity
a ten year old VUL or UL may still have surrender charge so be very careful to explain to the client about that.
VUL or UL policy can use 1035 exchange to transfer to Annuity without tax issue. The fix annuity will not get him the 6%-7% return at all. But variable annuity does not have guarantee of return, except guarantee for income or DB. At present time, all VA companies are reducing their guarantee to Income or DB to 6% or less. If you liquidate after ten year, your guarantee for the Income or DB will be lost. The index annuity may have some good feature about not losing money. But the return may be limited, especially lately. There is no way to guarantee the ROR unless it is fixed annuity. But fixed annuity will only guarantee 3% or less.
If you use the 80K cash to get an annuity, his 1.5 million DB will be gone. So better not to do anything in my opinion.

 

[insuranceexec]

.There is no way to guarantee the ROR unless it is fixed annuity. But fixed annuity will only guarantee 3% or less.

Not Exactly! Check your figures.

 

[NPCOACH]

I have a scenario/case that I need some help on. I met with a client today that has a Variable Annuity that is about 10 years old. It has a $1.5mm death benefit and the initial value 10 years ago was $150k. It is now worth around $88K.

That being said can I find him what he wants:

He wants a $1.5mm death benefit, and a guaranteed ROR of around 6-7% tied to either a fund or index(that doesnt really matter). He wants and underlying guarantee that whether the market is up or down, he is guaranteed his ROR. At the end of 10 years he wants it to be liquid.

Thanks in advance. FYI I am pretty new to the annuity market so if I am missing something here, just let me know and I will respond

I agree with the others - it is unlikely to be a true variable annuity. Probably a variable life product of some kind. If it was a true variable annuity, depending on the company, you might be able to do a partial surrender (1035 exchange) and leave some of the variable annuity death benefit.

The Hartford has/had a variable annuity that kept the death benefit level even after a partial surrender. I had a client with a 200,000 variable annuity with a level death benefit type rider. The cash had dropped from 200,000 to about 170,000 (this was before the big crash). We did a partial 1035 exchange with about 150,000. The 20,000 we left in the policy maintained the 200,000 death benefit. Not all companies do this and it was 2 years ago - your case might be different.

As far as the fixed annuity is concerned, I think even a 5% return is pretty scarce these days. His idea of 6 or 7% guaranteed is a pipe dream. I don't believe a 6 or 7% guaranteed return tied to an index has ever existed. What company is going to guarantee 6% based on an index that has dropped 30%?

Try to reset his expectations to something in the 4.75% range on a long term rate guarantee and you will be closer to the mark. Naturally, some products might have large initial interest bonuses - but they are accompanied by high surrender charges. Some companies have guaranteed income withdrawal benefits that grow at 7% or more - but only as an income - not as a walk away product.

Good Luck and let us know what he really has and we can give you a better fix on the situation.

 

[gzpxyj]

Not Exactly! Check your figures.

I know some fixed annuity may guarantee a few years with higher interest. But they have long surrender years and after the guarantee years, who knows what interest will be set? In the end, no annuity company will give you 6% or up guarantee for 10 years.

 

[insuranceexec]

In the end, no annuity company will give you 6% or up guarantee for 10 years.

That is true; but you said 3% or less, and that is not true. There is a 5 year guaranteed 5.05% for all 5 years at the moment.

 

[budfox7]

I have a scenario/case that I need some help on. I met with a client today that has a Variable Annuity that is about 10 years old. It has a $1.5mm death benefit and the initial value 10 years ago was $150k. It is now worth around $88K.

That being said can I find him what he wants:

He wants a $1.5mm death benefit, and a guaranteed ROR of around 6-7% tied to either a fund or index(that doesnt really matter). He wants and underlying guarantee that whether the market is up or down, he is guaranteed his ROR. At the end of 10 years he wants it to be liquid.

Thanks in advance. FYI I am pretty new to the annuity market so if I am missing something here, just let me know and I will respond

Sounds like a VUL....Theres no way that you can have a VA with a death benefit of 1.5mill , I believe the only way possibly if he " MEC" it. Although that would be alot of dough to fund.

 

[scagnt83]

You need a lot more info on this one!
And I dont mean just from your clients mouth, but you need to get your hands on the original policy if he still has it, but the last quarterly statement at the least.

I agree that theres no way this is a VA, SPVUL most likely.
$150K would need a return of well over 20% to get a DB of $1.5mill after 10 years.
A VUL could very well still be in its surrender period. This is an important aspect.