How to reduce these expenses

Mar 7, 2018

  1. mespinosa
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    mespinosa Expert

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    These are the expenses in a NA IUL3 annual statement. Wondering how to reduce some of these expenses.
    1. What's the best way to pay the premium so as to reduce the premium load?
    2. Are these Riders needed or removed to save $2,025 per year?
    3. What are these Other Expense Charges (2)?

    Premium Load: $4,488.87
    Cost of Insurance: $5,257.30
    Other Expense Charges: (2) $3,107.18
    Rider Charges: $2,025.00

    Benefits:
    OVERLOAN PROTECTION BENEFIT
    PREMIUM GUARANTEE RIDER
    PROTECTED DEATH BENEFIT
    Riders: Amount:
    ACCELERATED DEATH BENEFIT ENDORSEMENT N/A
    ACCELERATED DEATH BENEFIT ENDORSEMENT N/A
    ACCELERATED DEATH BENEFIT ENDORSEMENT N/A
     
  2. scagnt83
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    scagnt83 Worldwide Expert of Everything

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    This IUL has higher expenses than other NA products because it is a Lifetime Guaranteed product.

    Premium Load: This is a set % of the Premium paid. No way to change it.


    Cost of Insurance: This is directly related to 2 things:
    a. Death Benefit
    b. Testing Option (cvat or gpt)
    You can reduce the DB, but it will trigger Surrender Charges if you are still in the Surrender Period. (this means your Cash Value will be reduced)
    You are not able to change the testing option after the policy is issued.


    Other Expense Charges: This is basically an admin fee. Its technically a combo of two different charges, but essentially its an admin fee. It does reduce over time if I remember correctly. There is no way to reduce this without reducing the Death Benefit.


    Rider Charges: This is the Premium Guarantee Rider, the other two are included at no cost. No way to reduce this without reducing the Death Benefit.


    Why are you so concerned with reducing the expenses in this policy? That is something to worry about before you buy the policy. Not much you can do after the fact that doesnt result in a reduction in Cash Value (unless you are out of surrender period.... and Im pretty sure you arent)
     
  3. mespinosa
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    mespinosa Expert

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    Because I just received the first annual statement and am seeing the expenses ate up almost all the premium paid. The SOB of an agent said there are no premium loads in this product and all of my money will go to work for me. I am guessing it goes to work for him. How can people feed their kids swindling other people is beyond me.
     
  4. scagnt83
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    scagnt83 Worldwide Expert of Everything

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    Sorry to hear that. What did the illustration look like that he showed you?

    What is the Death Benefit, what is the Premium, and what is your age? That will really tell us how good or bad of a policy they designed for you.


    North American has a product called the "Rapid Builder", and that is their product with no premium load (when the waiver of surrender rider is chosen). The Guarantee IUL is the most cost heavy IUL they offer.

    With IUL, the premium to death benefit ratio is adjustable. To max out the performance of a policy, you want the lowest possible DB for the Premium you are paying.

    If you have it in writing that they told you there is no premium load, then you could file a complaint with NA.

    However, having a premium load or not having a premium load is not the major issue. Though it could possibly get you out of the contract if the agent did indeed tell you that in writing. But the major issue is the amount of Death Benefit in relation to the Premium. If the Death Benefit is not the lowest possible, then there are unnecessary expenses. And that is why the expenses eat up the Premium in an IUL. Over the long term, expenses usually about even out with a no premium load product vs. a premium load product.


    The premium load does not go directly into the agents pocket. That is not how the commission is calculated. However, the agent is paid based on the amount of DB. So if the DB is excessive for the Premium, then the agent got paid more than they would have with a properly designed policy. And policies with high early cash values do usually pay less than ones that do not.
     
    Last edited: Mar 9, 2018
  5. pfg1
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    pfg1 Guru

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    Like SC said, seeing an illustration will go a long way to know how your policy was designed. As he mentioned (and he's our resident IUL guru) if its not designed for max funding, its not going to perform nearly as well. My guess is that is likely the issue...you are underfunded with the premium you are paying.
     
    pfg1, Mar 10, 2018
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  6. mespinosa
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    mespinosa Expert

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    Will I lose money if I ask to change the death benefit from "level" to "increasing" after the policy is issued? Not asking to decrease DB.
     
  7. jboussea
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    jboussea Guru

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    It depends on what your strategy is..

    As a general rule .. if you have an increasing death benefit and you're not overfunding policy.. you could lose money .. but if you're overfunding it .. you would build cash faster than if you leave it at a level death benefit.
     
    jboussea, Mar 15, 2018
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  8. mespinosa
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    mespinosa Expert

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    Mine is level DB. Will the surrender charge be triggered if change it to increasing DB?
     
  9. pfg1
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    You should post an illustration so you can get accurate info in regards to your policy.
     
    pfg1, Mar 16, 2018
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  10. mespinosa
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    mespinosa Expert

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    I am not comfortable sharing sensitive information in a public forum. Also, it's bulky. Perhaps, I can post full information of 1 or 2 pages. What info would be helpful?
     
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