IUL Questions

Can they have different caps for inforce and new policies?

Would they? I understand Midland's IUL is at 14% cap, and I know that it can be reduced. Can they reduce a policy sold this year and leave new policies at 14%?

Would they?

Have they?

The cap is locked in for a year. At the anniversary they can lower it. And yes, they would and they have. Some carriers are worse than others. NA and LFG have excellent renewal histories in my experience.
 
From what I have seen/heard, Trans has not been great come renewal time on those caps.

I would have a hard time giving Trans any business ever again. Maybe term. Maybe.

They have been awful to their inforce book of business, not only with caps, but they have raised the costs on their in force policy holders not once, but twice.

When they decided to drop their Trans Ace product they cancelled policies that were in the middle of underwriting. Who does that? They dont deserve our business.

Man I sound bitter:)
 
Yes, that's generally the best way to structure an IUL.

Could you ever do the opposite to create a high face amount/low premium alternative to term?

Something that will last their whole lives without having to pay the WL premium?
 
Could you ever do the opposite to create a high face amount/low premium alternative to term?

Something that will last their whole lives without having to pay the WL premium?

As Peter said, that is called GUL. There is a GIUL too, but the guaranteed premium is often higher for it vs. normal GUL.

You could create that with an IUL. But it would not be guaranteed and would have a high risk of lapsing.


UL in general (minus GUL), is designed to be a high cash value product. A strong guarantee and high cash value within a UL are essentially the same thing.
 
I'm not sure I completely understand.

You're saying that if I sell Jane a policy today, one year from now, her cap can be lowered from 14% to, say, 10%. Yet, one year from now, I could sell Ivan the same policy with the 14% cap for one year? After one more year, HIS could be lowered to 12%, and Jane's could still be 10%?
 
I'm not sure I completely understand.

You're saying that if I sell Jane a policy today, one year from now, her cap can be lowered from 14% to, say, 10%. Yet, one year from now, I could sell Ivan the same policy with the 14% cap for one year? After one more year, HIS could be lowered to 12%, and Jane's could still be 10%?

Yes and no.

The Cap can be renewed at the anniversary date at a lower (or higher) rate. But when they Renew Caps, it is for the entire policy line, not on an individual basis.

So if you sell Client A a policy in 2014, and Client B a policy in 2015. Then Client B could have a higher Cap than Client A during 2015. But assuming that they are both the same policy line, in 2016 their Caps would be the same. If they were separate policy lines then they could potentially be different in 2016.

When I have seen Cap reductions (with NA/MNL & LFG), they have not been significant reductions. And it is not something that they are going to reduce each year usually. And while interest rates do affect IUL Renewals, they are not as sensitive to interest rates as IA renewals are.
 
Figured I'd bump this rather than do a new thread.

Concerning loans: I am doing a comparison between LSW & Midland IULs. I am using a 45 YO Male, non-tob, $1m level DB, at target for 22 years, then taking loans. What I've found is that Midland has a higher target (therefore, in this case, higher annual premium), a higher cap rate (14 vs. 12.5), and because of the new rules, Midland's illustrates at 7.77 vs 7.07 for LSW. For the sake of this comparison, I lowered Midland's to 7.25.

Not surprisingly, Midland comes in at a much higher cash value in 22 years, $727,000 vs. $612,000.

What does surprise me is that the loan computation shows Midland at $55,000 (rounded) to age 100, while LSW is $66,000 to age 120. That's a huge difference.

I wonder if much of the difference would have to do with how I illustrated them. I'm not sure how to dial them in so that I'm comparing apples to apples.

Any help is appreciated.
 
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