Sure
Is VUL a good product?
- Thread starter Chuckler
- Start date
-
- Tags
- variable life vul
So is a SPIA but that's not right for everyone either (not saying you do that w/ everyone).Fantastic distribution vehicle though.
- 11,277
I like the idea of building a laddered portfolio of NQ SPIAs to "dollar cost average" into the mortality tables for higher income with each level purchase.
So AIG has a fixed product that will typically outproduce a SPIA (without the tax advantage if a 1035) and keep the funds liquid (subject to surrender). Really a great product for maxing lifetime income.
I like VUL's. It has benefits that other products can not provide. However, compared to IUL and whole life you need a longer period to make sure they work. I would say you need at least 30 years of premium payments compared to 20 years for whole life and IUL. Now that means anyone over 50, it is harder to make VUL work. Having said this, it is usually hard to find folks in their 30s who understand market risk. It is easy to find aggressive 30 year olds but they likely will chicken out at the first downfall in their lifetimes. The prospect market for VUL therefore is smaller. It is easier to sell whole life to most people. Whole life and IUL also have other risks. Whole life will not do well if inflation takes off and interest rates dont keep up, whole life is a disaster is long term rates drop to 0.1 percent on 30 year bond and stay like that for 30 years. Whole life death benefit does not rise as fast as IUL or VUL if death benefit is needed later on. IUL assumes that stock dividends will continue to be paid to the insurance company bottom line. If there is a corporate tax change and SP 500 companies stop paying dividends what do you think will happen to cost of insurance charges and renewal compensation. VUL will survive if dividends all disappear and it will likely do better if we have long term rates stuck at 0.1 percent. The biggest benefit no one has mentioned it is that if you have VUL as part of your portfolio, you can portfolio balance inside VUL with no tax consequences. You could also do that with Roth's but usually you are capped how much you can put into Roth's. I wish we had a regulation that you need to work at least 5 years in the industry before selling VUL's because the chance of over selling is very very high.
Joseph Maczuga
New Member
- 1
A VUL can be very usefull if designed properly, and it should be monitored at least annually. Make sure that you use a cost efficient product, and design the premium with a methodology (GPT or CVAT) that is a complimentary to the client's strategy. Most VUL's crash due to lack of monitoring or minimal funding. If done properly, they can usually outperform an IUL, especially in the last 6 years since there are no CAPs or Participation Rates. If you calculate the 12 month policy expenses and have that amount placed in the fixed account with all policy charges taken from that account, the investment portfolio will free-flow with the market without the drag. IUL's still lose money in a down market ince policy charges are still taken from the cash value, even with a -0- floor.
- 10,329
There are IULs out there with 1% and even 2% floors on them.
- 10,329
That is not beneficial at all if the investment portfolio is performing close to current benchmarks.
I've really been going back and forth the last couple of years getting my 6 again just to sell VUL. The reality is that there is no comparison to VUL in the guaranteed death benefit space. Is winning just about every time.
Now that more and more VUL are staring to offer index accounts similar to IUL but with SIGNIFCANTLY les policy charges, its starting to look very nice on the accumulation side as well.
Now that more and more VUL are staring to offer index accounts similar to IUL but with SIGNIFCANTLY les policy charges, its starting to look very nice on the accumulation side as well.
- 4,575
My guess is he is talking IUL because having to have the COI & fees pulled from the index accounts will mean the amount in fees for 11of the months will be pulled before the index segment ends & will get credited with 0% for being taken out prematurely to cover fees. The fixed account credits for the days on deposit & doesn't require waiting to end of index segment. I don't believe VUL functions that way
Similar threads
