IUL for Death Benefit

Pippo

New Member
2
Most talk and advice regarding IUL focuses on overfunding for income etc. What is the thought on using IUL for permanent death benefit as the focus? I.E. What is conventional thinking on proper funding level, etc. for death benefit?

I feel comfortable running IUL at 6% and funding a little lower than whole life premiums but the range can be enormous. The last thing I want to do is sell a policy that will disappoint the client and embarrass me in the future. What is the general consensus---appreciate everyone's thoughts.
 
If all you want is life insurance for the death benefit, and you happen to be using an IUL chassis, then use a product with a non-lapse guarantee rider. Fund it at least at that level.
 
I'm in a captive environment so no secondary guarantee on our IUL available but I suspect funding it at that level and using 6% projection, my clients (and self) should be good and hopefully won't have to make too many changes down the road. Thanks
 
I always run IUL illustrations at 6%. I feel comfortable that there is a decent chance it will do that over time.

Does your company have a GUL available? You could use that if the focus is purely DB.
 
The advantage of an IUL (or a dividend WL) is that you can have index interest credits (dividends) help pay for the policy long-term. I would choose a par whole life product over an IUL for a death benefit focus as dividends would be more reliable over annual index interest credits.

Otherwise, you have a "pay forever" scenario. It may be a lower annual cost, but you'll pay for it every single year with a greater total cost of ownership compared to a cash value policy.

So, it depends on what's important: low cost per year or lower total cost of insurance.

If it's cost per year: term or non-lapse UL

If it's total cost of insurance: par whole life with dividend offsetting future premiums. Just be sure to disclose clearly that dividend performance is not guaranteed and they could pay more or less depending on policy performance.
 
Minnesota Life's Eclipse Protector is great for this scenario. You can set up a life pay or limited pay policy with a guaranteed death benefit to any age up to 120, as well as a 2% or 4% maximum monthly acceleration of the death benefit for long term care needs. With the life pay option, strong index performance can decrease/eliminate premiums or build cash value, with the limited pay option, it can give the client access to the cash value through loans/withdrawals. I highly recommend looking into this product if you have not.
 
The advantage of an IUL (or a dividend WL) is that you can have index interest credits (dividends) help pay for the policy long-term. I would choose a par whole life product over an IUL for a death benefit focus as dividends would be more reliable over annual index interest credits.

Otherwise, you have a "pay forever" scenario. It may be a lower annual cost, but you'll pay for it every single year with a greater total cost of ownership compared to a cash value policy.

So, it depends on what's important: low cost per year or lower total cost of insurance.

If it's cost per year: term or non-lapse UL

If it's total cost of insurance: par whole life with dividend offsetting future premiums. Just be sure to disclose clearly that dividend performance is not guaranteed and they could pay more or less depending on policy performance.

With par whole life you are paying for two guarantees, the death benefit and also the guaranteed cash values. That isn't cheap, especially in a low interest rate environment.

With a no lapse IUL you pay for only one guarantee, the death benefit. You will also probably have cash values depending on interest credits but you will have the death benefit no matter what.

If it were me I would use that same premium you were trying to get me to pay for par whole life and I would buy 40% more death benefit guaranteed, if death benefit were my goal. I may still even end up with more cash values that the whole life contract depending on performance but I know I'll have more face amount guaranteed.
 
Back
Top