IUL Questions

[aclaro]

Because you're doing the clients a disservice by selling at target when showing income. The policy will underperform because you're designing wrong.

 

[scagnt83]

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.

If maximizing the CV is your goal, and you are paying for more than 5 years. Then generally speaking, the level DB option is not the best to use.

I usually start with the Premium and not with the DB. Use the same Premium, lower the DB to the lowest possible without creating a MEC.

To give it the greatest Rate of Return, use GPT Testing, then use an Increasing DB (opt 2) during the years you pay Premiums and then switch it to a Level DB (opt 1) once Premiums stop. That is how to fully maximize an IUL policy.

When you solve for Loans make sure that you are using the same Loan Option (fixed or variable). Also make sure the you are comparing similar products (NA has 3 individual IULs).


Target is not a realistic premium to recommend a client pay. Target Premium is a calculation for the amount of Premium that an agent earns Commissions on. It is not a suggestion of what premium the Owner should pay.

 

[wln417]

I'm not asking how to design a policy. I'm asking about the loan component of the illustrations.

 

[DHK]

Let's sum up:

"I'm comparing two policies at target. One company has a higher target than the other. However, I want to know why that same company has a LOWER loan income illustration. You also stated: "I'm not sure how to dial them in so that I'm comparing apples to apples." But don't ask me how I'm structuring the policy, just explain the difference in the loan illustrations."

I'd call your wholesaler or the two companies directly.

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Plus, I would compare "apples to apples" by using the same premium and death benefit structures, not comparing "target premium".

You can only illustrate what you've got. If the client has $10,000 per year, then illustrate both at $10,000 per year.

 

[wln417]

Right, almost. I should have phrased the question more directly, as in, why would an annual loan amount with $700,000 CV show a much lower annual amount than another with $600,000 of CV? Actually, the way I got to those figures has no bearing on the question.

I would have omitted it altogether but I thought maybe someone would use the figures to do their own illustration to see how I got what I got, and then maybe they'd be able to tell me why I got there, and what I could have done different. It was a little hard to believe that there is that much discrepancy between the two companies.

I went back and read the policies and how the loans are credited, and now I have my answer.

 

[aclaro]

I went back and read the policies and how the loans are credited, and now I have my answer.

Why don't you enlighten us?

 

[pfg1]

Right, almost. I should have phrased the question more directly, as in, why would an annual loan amount with $700,000 CV show a much lower annual amount than another with $600,000 of CV? Actually, the way I got to those figures has no bearing on the question.

I would have omitted it altogether but I thought maybe someone would use the figures to do their own illustration to see how I got what I got, and then maybe they'd be able to tell me why I got there, and what I could have done different. It was a little hard to believe that there is that much discrepancy between the two companies.

I went back and read the policies and how the loans are credited, and now I have my answer.

I'd like to know what you found out that made a difference. thx

 

[stockarb]

Run your IUL ay 5% CAP..
More realistic and client first
C'mon... 7.5% ??
Under promise and over deliver!
GVC

 

[benefitguy]

I do a lot of Index IUL, and if done the CORRECT way for the client and not the agent then they are amazing products. By this I always run minimum death benefit max cash value. This allows me to to over fund the policy, I also like to reduce the default interest rate by 1.5% to be on the more conservative side then show taking loans from the policy using variable rate and see how long it will solve for. As someone currently diagnosed with MS, I like to use companies the have Living Benefits included in their policy's at no extra charge. Those benefits are critical Illness, Chronic Illness, Terminal Illness. Also depending on the client I also run the illustration as increasing and not level. You really should have a good mentor if you want to offer these products so you don't end up hurting the client. When in doubt, always call the carrier and have them teach you how to illustrate a proper proposal. Please excuse any typos, I lost some of my eyesight due to the disease.

Best Of Luck

 

[ATM]

I'm not asking how to design a policy. I'm asking about the loan component of the illustrations.

You are handicapping the MNL product by reducing the illustrated rate from 7.77% to 7.25%.

The product is designed to be able to offer a higher cap than LSW so reducing the illustrated rate, which is determined by back testing according to the same NAIC rules that LSW used to come up with 7.07%.

Rerun at 7.77% and you will get a much different number. I get an annual loan amount of $93K+ using your 45yr old male NT 1M level face with target premium.

Other things that will affect the illustration are the loan interest rate. Midland currently charges 4% for a variable loan but you can only illustrate 5.47%. NAIC rules allow a 1% arbitrage between the loan and the credited rate but the loan rate still affects the illustrated loan amounts. The lower the rate the higher the income.