I’m not in favor of IULs.

[Tahoe Ray]

Most agents I know definitely don't "love" selling properly designed IUL.

The comp sucks and they require constant monitoring.

Properly designed, they can outperform WL but are a pain.

 

[Allen Trent]

my WL beats it. It's only when assuming the same higher rate year over year after decades will the IUL exceed the WL, but those assumptions aren't realistic

So, the current lower projections of a UL/IUL aren't realistic, but non guaranteed dividends of a WL that have done nothing but go down the last 30+ years are realistic.....even though a major WL carrier last year pretty much eliminated dividends on their in force WL. Just playing devil's advocate

I'll end with this, but the whole no-lapse guarantees or level term are often for about 20 yrs

This just isn't true. There are many no lapse secondary guarantee products guaranteed to age 120 & you can solve to have the no lapse guaranteed with as short as 1 payment, a 10 pay, pay to age 65, 70, etc or pay to age 120. Just saw a clients policy that paid $105k & had $700k of 2nd to die guaranteed no lapse to age 120. At 6% growth in some other investment, it would take that couple 30-35yrs to turn $105k into 700k & it wouldn't be guaranteed. I told the couple I couldn't see anything wrong with what the agent had sold them, especially considering the money had come from their bank money market making literally zero interest

 

[scagnt83]

Please don't take my questions the wrong way. I'm pretty experienced as a client in this space, as a real estate investor, and then as an agent (more recently)... I love comparing options as I want the best not only for some significant money I put into these policies each year, but also for clients.

Risk would definitely be a factor, I agree. But one of my key aspects is that my WL policies (which I think is done better than 95% of others I've seen) are a savings vehicle (one that will make around 5-ish% but still...). What I use my cash value for is my investment, and we use it pretty aggressively. My policy is just a safe place to run back to with no worries of loss or market fluctuations, etc., yet it's also built for max efficiency (high cash value / low DB).

I've compared my stuff to about 7 IULs today alone and I just don't get it. Even with the non-guaranteed % my WL beats it. It's only when assuming the same higher rate year over year after decades will the IUL exceed the WL, but those assumptions aren't realistic. Further, the WL crushes the IUL on death benefit later in life... which one is more piece to think about.

You mentioned the 40 year history... but this is another issue I have with IULs. They were "invented" around 1997 based on my research... and it looks like it was Transamerica who did the first policy. So any historic claim is looking at the S&P 500 or something, but that isn't even realistic since so much more is going on in a policy. I have yet to see any old illustration (late 90's early 2000's) compared to actual values to present day, and I know many people have that challenge out there.

I'll end with this, but the whole no-lapse guarantees or level term are often for about 20 yrs, assuming you haven't missed any payments and played the game perfectly. However, cost of insurance will go up, up, up. The ticking timebomb decades from now will be top of mind then but it's not discussed today. It's like all the VL products that were imploding decades after they were sold in the 80s... I think of all the late night news shows of the old ladies getting a bill for a 20K premium or else their policy lapses.

As an investor, why not do a very safe and predictable WL, then take loans and make triple digit returns all day long... I'm very risk tolerant too, but I want my risk in what I control.

As I suspected, you did not address a single fact I stated. Your mind is made up.

If the IULs you are looking at are being outperformed by WL, then you dont know how to design an IUL policy. That is a fact.

If "the costs go up up up" is your main argument... then you have never even looked at an expense report on a properly designed IUL. Internal expenses are lower on the IUL than WL... even guaranteed expenses. And expenses in old age are a tiny % of the CV.

All you did was ARGUE risk tolerance and say that IULs havent been around for more than 15 years.

You ignored the actual facts I gave you about why IUL is more efficient than WL... so therefore, have a nice night. A closed mind is not worth my time. You came here for an argument, not for facts.

Go beat your chest and tell someone else how smart you are. So far you have shown yourself to be an amateur when it comes to life insurance.

 

[REI_Velocity]

As I suspected, you did not address a single fact I stated. Your mind is made up.

If the IULs you are looking at are being outperformed by WL, then you dont know how to design an IUL policy. That is a fact.

If "the costs go up up up" is your main argument... then you have never even looked at an expense report on a properly designed IUL. Internal expenses are lower on the IUL than WL... even guaranteed expenses. And expenses in old age are a tiny % of the CV.

All you did was ARGUE risk tolerance and say that IULs havent been around for more than 15 years.

You ignored the actual facts I gave you about why IUL is more efficient than WL... so therefore, have a nice night. A closed mind is not worth my time. You came here for an argument, not for facts.

Go beat your chest and tell someone else how smart you are. So far you have shown yourself to be an amateur when it comes to life insurance.

As I stated earlier, I'm open to any and all arguments. I would love for you to produce an illustration I can review. As an investor I look at the numbers... and then look at the numbers in context with the larger strategy. Can you produce an illustration from the late 90's/early 2000's and compare with todays actual account values? My questions are simply looking for objective facts as opposed to "my policy is better than yours." I'm happy to compare notes.

Arguably, IULs are sold as investments. It's literally connected to volatility. I NEVER sell one of my WL products as an investment. My investment is always what I do with my cash value... and my WL isn't connected to the market. I'm clear that WL is a savings vehicle (it's just good enough to beat many investments by itself.)

Oh, and I don't design the IULs I look at... I have other agents do it. This is unbiased approach. I have probably 30 or more in a file. Each from agents saying they are the "best." And it's not that the illustrated expenses go up, it's the actual expenses... the fine print of what "can" increase (and of course will increase as insurance is more expensive the older you get.) It's the actual numbers versus the illustrated that no one seems to want to share. This has already happened with variable products.

 

[REI_Velocity]

So, the current lower projections of a UL/IUL aren't realistic, but non guaranteed dividends of a WL that have done nothing but go down the last 30+ years are realistic.....even though a major WL carrier last year pretty much eliminated dividends on their in force WL. Just playing devil's advocate



This just isn't true. There are many no lapse secondary guarantee products guaranteed to age 120 & you can solve to have the no lapse guaranteed with as short as 1 payment, a 10 pay, pay to age 65, 70, etc or pay to age 120. Just saw a clients policy that paid $105k & had $700k of 2nd to die guaranteed no lapse to age 120. At 6% growth in some other investment, it would take that couple 30-35yrs to turn $105k into 700k & it wouldn't be guaranteed. I told the couple I couldn't see anything wrong with what the agent had sold them, especially considering the money had come from their bank money market making literally zero interest

Not just the no-lapse guarantee, but what about the level cost of the renewable term. Often that is said to remain level for X amount of years, at which time it "could" increase (it gets more expensive as we get older). These are the issues people won't care about until 20-30 yrs from now when the grenade is dropped in a letter stating "you're premium has increased due to costs." This has literally happened with other products. IULs haven't really run a full cycle from young to told.

 

[REI_Velocity]

Most agents I know definitely don't "love" selling properly designed IUL.

The comp sucks and they require constant monitoring.

Properly designed, they can outperform WL but are a pain.

Perhaps, but I'd argue 70% of agents can't make a good WL policy. 25% of agents may make a mediocre WL policy, and a mere 5% can make a great WL policy. It all depends on who you compare against. I always ask for the best IULs to compare notes. I'm happy to do that privately... not to "debate" but just to learn what's out there. We all have our blind spots.

If you compare against a WL policy that has zero cash value for 3 years... well, then of course anything compared against it that's built a little better will look much more attractive.

 

[REI_Velocity]

Companies have already introduced their new WL platform contacts to conform with the new 7702 laws.

For WL, the minimum premium/max death benefit sale... the premium is higher, because the minimum reserve rate (2%) is lower (than it was at 4%).

For limited pay WL, the minimum DB/max premium sale... the death benefit is smaller, so more cash can be working in the policy with less net amount at risk.

Now, I can't quantify exactly the benefit to the client, but that's really inconsequential since they can't necessarily choose between a 2% minimum reserve rate and a 4% reserve rate policy.

I just know that it introduces a new level of efficiency.

I've done a lot of comparisons to the 2022 7702 updates versus pre-22. You're right, you can essentially pack more cash in the policies now, but it's not really a benefit unless you have a ton of cash to put in.

For example, if a basic underwriting limit for an average income earner is $2,500,000, for pre 2022 policies less premium would buy more death benefit which would mean you'd hit the 2.5mm faster. Now in 2022 you can pack a decent amount more to get the same 2.5mm. So if the game is cash value (which I like), it could be attractive if someone has the funds to "pack more in." However, if someone is on a smaller budget and putting 5 or 10k a year into it then they are getting less DB for their dollar as they won't be anywhere close to that 2.5mm initial limit. Assuming this stays the same for future years, as they make more money and get more policies it could be in their favor since the ins company will consider all of the current insurance they have.

Hope that makes sense.

 

[Allen Trent]

Not just the no-lapse guarantee, but what about the level cost of the renewable term. Often that is said to remain level for X amount of years, at which time it "could" increase (it gets more expensive as we get older). These are the issues people won't care about until 20-30 yrs from now when the grenade is dropped in a letter stating "you're premium has increased due to costs." This has literally happened with other products. IULs haven't really run a full cycle from young to told.

It is an actual fact that the internal COI per thousand of insurance will indeed increase annually as we age, even in the best case projected columns & could actually be higher if carrier raises the COI charts as shown in guaranteed worst case columns. UL-IUL-VUL internal COI is definitely not level term based on issue age, it is annually renewable term of attained age. However, even though the cost per 1,000 of net amount at risk will for sure go up, it is possible to have the client be charged less real deductions for those costs if you are replacing the level insurance amount with cash value growth from deposits & from interest credited.

I have seen some old ULs max funded that credit 4.5% & are net of 4.4% on people 90 years old because there is literally no insurance left in the policy, the cash has grown so high that the only insurance left is the tiny amount required by IRS as corridor of insurance.

 

[REI_Velocity]

So, the current lower projections of a UL/IUL aren't realistic, but non guaranteed dividends of a WL that have done nothing but go down the last 30+ years are realistic.....even though a major WL carrier last year pretty much eliminated dividends on their in force WL. Just playing devil's advocate

Actually, one of my WL policies outperformed the non-guaranteed values this year (I need to check the others). The policy was written around 2015. The carriers I prefer haven't changed much at all on dividends.

I'm sure some do, have, and will change dramatically, but I don't work with many carriers, only top tier and ones that work well with cash value optimization. Even then I prefer one or two above the rest based on performance and record.

And you can't really compare dividends to 30 yrs ago. Just before that was the inflation fiasco in the 80's where dividends went waaayyyy up slowing tracking inflation. So of course they went down from there, but that wasn't isolated to WL companies... it's a market thing. In fact, I'd be surprised if we don't see dividends slowly going up with all the fed hikes in 2022.

 

[REI_Velocity]

How will all the "floor" rates kicking in on IULs change things? I know the answer, but it's not a good thing and any illustrated returns get crushed. Imagine if it happens for a couple years in a row, or more. I'd love to see some in-force illustrations with today's stock market environment baked in.