Is CV a marketing gimmick in VUL?

[Survivor]

Al:
Right now the DB is 460K because of the loan. That is, if the loan was not repaid at time of death the DB would only be 460K.

So, if he died today, the death benefit would be 460K. She takes a 40K partial surrender, which reduces her CV to 60K-ish and her DB to 420. Then, she takes that CV that is cash in hand and repays the loan with it. Thus, the loan is repaid and the death benefit is now 460 because the loan has been repaid but the taking of the partial surrender still leaves the DB reduced.

I believe her taking the partial surrender will create a taxable event, however. The way the IRS sees it, if you take a partial surrender they consider you taking the portion that is interest first. Say she paid 100K for the policy, and had earned 30K in interest. If she withdrew 40 thousand, the IRS sees you as taking that 30K interest first, and THEN 10K of what you paid. Thus, 30K is what is taxable.

This must all be balanced against her father's life expectancy. The idea of not letting the policy loan set is to prevent it from gaining more interest and snowball into something larger. The amount that would have to be partially surrendered would have to be 40K NET of taxes. Thus, the DB could be reduced by 50 or 60K in theory to repay a 40K loan. Its a simple matter of calculating how quickly this loan will compound and how long he "should" live.

 

[Guest]

Al -

Why are you making such a big deal about learning about VUL?

No problem with just general knowledge

Asked and answered.

but how much time do you really have on your hands?

I'm semi-retired. I work as much or as little as I want. We live a modest but comfortable lifestyle from investments and the other businesses I own; a low mortgage being our only debt.

I don't look at it as "time on my hands." I see it as "time running through my hands." It is a perspective you will all have when you approach your 60th birthday... as I am doing now (Dec. 1).

Al
InsuranceSolutions123 Agency
Adams-Blake Publishing
Jaya123

 

[GreenSky]

I'm semi-retired. I work as much or as little as I want. We live a modest but comfortable lifestyle from investments and the other businesses I own; a low mortgage being our only debt.

So, I am right. This is really more a hobby than an occupation. This explains your somewhat limited knowledge of life and health insurance.

If I was a consumer, I'd be concerned about having a part-time agent giving me advice. But that's me. I prefer to work with a professional, like a full-time doctor, not a guy who is semi-retired and might not be up to the modern techniques. I don't want my doctor to treat medicine like a hobby.

Guess your clients, because of their extreme wealth in comparison to me and people in my neighborhood, don't care about this.

Please don't take offense. This is just an observation and my opinion which you have pointed out many times means nothing to you, and really shouldn't. (I do worry about your clients though.)

Rick

 

[Guest]

Guess your clients, because of their extreme wealth in comparison to me and people in my neighborhood, don't care about this.

You are right about that. Those who trust me with their health care insurance seem to be happy with the advice I've given them.

Please don't take offense. This is just an observation and my opinion which you have pointed out many times means nothing to you, and really shouldn't. (I do worry about your clients though.)

You are right again. Your opinion is your own and is not important to me. You are welcome to have whatever impression you wish of me. I'm successful in my business. I don't know if you are but after the terrible job you did with the client I sent you who lived in AZ, I have my doubts.

Rick, from all your many negative posts here, it is obvious to me that you have a huge chip on your shoulder. You are not someone I would want as an agent, and I can't imagine who WOULD want you as their trusted adviser, but I'm only one opinion.

At the end of the day Rick, no one is going to ever say that you are a nice guy. Maybe you are smart and maybe you know a whole lot about insurance... but I doubt that anyone really likes you. I know that I don't. Indeed, you go out of your way to make people dislike you.. at least in my one opinion.

I don't think you are on this board to help. I think you are here to feed your ego by beating up on people. And you are very good at doing that.


Al

 

[LGilmore]

Al,

I guess I should ask why is she worried about the cv? Does she want to take money out?

The guy's 83, not the best health? and there's a 100k in the cv? and it's a level db? Shouldn't the policy be just fine? or was too much money taken out previously?

the reason for the ??? all over is without knowing the policy and it's provisions (like term table) it is hard to advise you. I would guess that unless she needs the money, things sound fine as there's still a 450k+ db on the thing not in risk of lapse...

She should just contact the company directly and have customer service walk her through the policy if she doesn't like the ML guy who sold it to her...

With a varible (or any CV policy) it is hard to offer anyhelp without being able to see the policy provisions as there may be significant differences between one policy and another...

 

[djs]

Al:
Right now the DB is 460K because of the loan. That is, if the loan was not repaid at time of death the DB would only be 460K.

Not true. The death benefit is still $500K, of which, $40K is used to repay the loan, netting $460K.

Dan

 

[GreenSky]

At the end of the day Rick, no one is going to ever say that you are a nice guy. Maybe you are smart and maybe you know a whole lot about insurance... but I doubt that anyone really likes you. I know that I don't.

Come on. Won't someone make a post at the end of the day saying that I'm a nice guy? (You don't have to say you like me).

Rick

 

[senior-advisor-indiana]

Rick,

I think you are a nice guy. I only see you "picking" on one person. Very entertaining.

 

[Survivor]

Not true. The death benefit is still $500K, of which, $40K is used to repay the loan, netting $460K.

Dan

This is exactly what I said. In effect, the db is currently 460 because if he died today she would only get 460, which is the 500K less the 40K. This is how I would explain it to a customer at least. If you say, "yeah, you've still got a 500K DB" and the guy croaks tomorrow, she is gonna wonder why she didn't get the other 40K b/c you just told her the DB was 500K

 

[djs]

This is exactly what I said. In effect, the db is currently 460 because if he died today she would only get 460, which is the 500K less the 40K. This is how I would explain it to a customer at least. If you say, "yeah, you've still got a 500K DB" and the guy croaks tomorrow, she is gonna wonder why she didn't get the other 40K b/c you just told her the DB was 500K

I knew that's what you meant to say, but if you go back and reread your post, you reduced the death benefit to $420 after the $40K partial surrender. The surrender would make it $460, because you truly still have a $500K death benefit.

There could also be tax implications between saying it's 460 and saying its 500. If it pays out as a death benefit, probably not, but if withdrawn (or cancelled), it may.

By the way, I'm not sure the surrender concept works on this. Actually, I have no idea, but I'm trying to figure out what it is your surrendering in this situation. Basically, it's cash to pay off the loan, and then reducing the db to keep the same problem from happening again. I doubt it's an even amount on both sides though, and it would be interesting to see with say a 5 year life expectancy, which way is more advantageous, or at least, where the cross over would happen....

I'll have to learn more about surrenders. Never done one, never really plan on doing one, okay, maybe I don't need to learn anymore about them.

Dan