Increasing and Level DB

[Jason Venecio]

Hello. I'm a new IUL agent and I'm still trying to learn how IUL functions.

My questions is, when a client starts taking income distributions at a certain age, if their death benefit is set up as INCREASING, does it automatically switch to LEVEL? I seem to have noticed this on the illustrations.

I appreciate your responses.

 

[DHK]

No, it does not AUTOMATICALLY switch.

It's just an illustration as to what it would look like using current assumptions. It's not a "letter of instruction" to the insurance company of what to do and when.

 

[Allen Trent]

Hello. I'm a new IUL agent and I'm still trying to learn how IUL functions.

My questions is, when a client starts taking income distributions at a certain age, if their death benefit is set up as INCREASING, does it automatically switch to LEVEL? I seem to have noticed this on the illustrations.

I appreciate your responses.

you are learning why so many IUL, UL, even some WL never materialize like originally illustrated years or decades earlier. most clients & even many agents believe the illustration is the actual policy contract. some clients & agents even say the policy sent at approval is wrong because the policy doesn't show the premiums stopping or the distributions coming out like the illustration showed.

However, the illustration is merely a dozen or more hypotheticals about when or how much premiums/deposits will be made, interest or dividends credited, when riders will be deleted, when face amounts will be reduced or like you mention if the death benefit option is changed to level from increasing or vice versa.

if anyone of these originally illustrated items doesn't actually get done, it can either be a minor issue or in some cases a catastrophic issue if never corrected for decades after planned.

IUL, UL & even max funding WL are a lifetime commitment by the client and agent to review every few years to adjust as needed. the problem is many of the original writing agents are not around in those later years to help micro manage or are unwilling to because they don't see any financial gain from helping clients maximize what they bought decades before

 

[bill3173]

Not knowing the carrier, or anything about the illustration that you ran, I wouldn't be able to comment on why the illustration appeared to switch to Level, but, Option B can be good, depending on the age of the insured. If you are appointed with North American, that may be a good place for you to plug in some numbers and different ages to see how this option performs.

I just did a $1M UL on a 32 year old female, and option B, in her case, was very appealing. If it is for a 55 year old male, not that appealing.

You may be able to find someone knowledgeable at the carrier who can discuss these options with you as well.

 

[jdumond]

Hello. I'm a new IUL agent and I'm still trying to learn how IUL functions.

My questions is, when a client starts taking income distributions at a certain age, if their death benefit is set up as INCREASING, does it automatically switch to LEVEL? I seem to have noticed this on the illustrations.

I appreciate your responses.

As others have stated, it does not automatically switch to level when you begin taking income. Most likely what you are noticing is the loan balance subtracting from the DB (assuming loan/interest is not paid in cash). It's probably still "option B" on the illustration, but ends up looking level as index gains are calculated to boost the cash value and in turn the DB while at the same time the loaned amount (income) and interest is lowering that same DB.

Hope this helps
joe

 

[Allen Trent]

As others have stated, it does not automatically switch to level when you begin taking income. Most likely what you are noticing is the loan balance subtracting from the DB (assuming loan/interest is not paid in cash). It's probably still "option B" on the illustration, but ends up looking level as index gains are calculated to boost the cash value and in turn the DB while at the same time the loaned amount (income) and interest is lowering that same DB.

Hope this helps
joe

Nah. Many carriers have designed the software defaults for "max distribution" solve feature to switch to level when premiums stop or distributions begin..................makes illustration look a ton better than leaving it up to the agent to figure out how to make those illustration changes.

 

[jdumond]

Nah. Many carriers have designed the software defaults for "max distribution" solve feature to switch to level when premiums stop or distributions begin..................makes illustration look a ton better than leaving it up to the agent to figure out how to make those illustration changes.

Really? which ones? I always do the DB switch manually even under the max distribution solve because the income is always greater. I typically use winflex and NA, Allianz, Symetra amongst others.


Joe

 

[Allen Trent]

Really? which ones? I always do the DB switch manually even under the max distribution solve because the income is always greater. I typically use winflex and NA, Allianz, Symetra amongst others.


Joe

let me check a few. but I know Securian does for sure. once you choose Max Distribution for your Design selection, it pre-populates a new death benefit option directly below it & defaults to "increasing to level" unless you manually override. Increasing to Level during the funding phase so you can fit most cash in smallest face & then level after funding period chosen to be illustrated. considering most carriers utilize the same ipipeline software, many look similar. Maybe play around with the carriers Design area.

 

[Jason Venecio]

Thanks for all your input on increasing my knowledge on this matter. I'll check the illustrations again and hopefully have a better understanding on what is going on.

 

[Jay1958]

I believe American National Insurance Company's software will automatically change the death benefit option from increasing to level when you select the Maximum Distributions solve.