Looking for properly designed EIUL from NA

[jboussea]

I thought these were a little on the higher side too. I was asking about preferred rating.

I was not implying that the premium was "high" ... I was wondering what it was so I can run something with NA to see how it stacks up.

if you say the premium is "high" i don't think you understand the point of the product. You can always decide to go with a lower premium .. you would then subsequently lower your death benefit. you have to decide if you want the cash accumulation or the death benefit.. there is a trade off if you chose one.. One would assume that "properly design" that you mean you want as high as a cash value as possible
Remember if it's properly design that the death benefit is increasing.. so if you still want a high death benefit.. buy some term to bridge the gap.. when your term runs out. The death benefit of a properly designed cash value IUL will be much higher.

 

[scagnt83]

North American Guarantee Builder IUL4 is $94k for 5 years no-lapse to 120 (non-mec) at Pref. runs out of CV at 86 at 4% ROR. don't know if Midland has a similar product. by way of comparison Protective's no-lapse IUL is over $132k.

I was using the early cash value product (EC5) which is the same as NAs "Rapid Builder" product.

Generally speaking, I dont like GIUL. If you need a guarantee get normal GUL. GIUL is just a watered down version of IUL and GUL combined. The one exception is Single Premium GIUL.

If DB is the goal get GUL or WL.
If you want CV growth combined with some DB, get IUL.
If you want a watered down version of both, get GIUL.

jmeo

 

[scagnt83]

I was not implying that the premium was "high" ... I was wondering what it was so I can run something with NA to see how it stacks up.

I was assuming the Early Cash Value product. Which would be Rapid Builder with NA.

Most agents dont sell it, but its 99% of what I sell. There is a small difference in long term return. But the liquidity it provides outweighs that for the majority of clients who are true prospects for IUL.

And yes, it pays the agent less... but doing the right thing for the client always make you more in the long run.

Ive heard many agents justify not selling it because of the small difference in long-term returns. But when you give the client a choice, 99% of the time they choose liquidity over a 0.5% difference 40 years from now.

 

[scagnt83]

North American Guarantee Builder IUL4 is $94k for 5 years no-lapse to 120 (non-mec) at Pref. runs out of CV at 86 at 4% ROR. don't know if Midland has a similar product. by way of comparison Protective's no-lapse IUL is over $132k.

Midland has the same product. Illustration is basically the same at 4% Credited Rate. Same Premium... CV is a few thousand higher with Midland... but the cash runs out 1 year earlier at 4%... of course neither really matter since its GIUL.

 

[jboussea]

I was assuming the Early Cash Value product. Which would be Rapid Builder with NA.

Most agents dont sell it, but its 99% of what I sell. There is a small difference in long term return. But the liquidity it provides outweighs that for the majority of clients who are true prospects for IUL.

And yes, it pays the agent less... but doing the right thing for the client always make you more in the long run.

Ive heard many agents justify not selling it because of the small difference in long-term returns. But when you give the client a choice, 99% of the time they choose liquidity over a 0.5% difference 40 years from now.

I see .. when I'm illustrating and comparing .. I almost always use their Builder IUL .. I think it all depends on how the agents is selling it. A lot of the IUL get sold as a retirement income vehicle at least .. and I'm thinking the builder IUL yields better income projection on the back end. I'm guessing you deal with higher net worth clients who value the flexibility of liquidity.
If I remember correctly, I don't think the Rapid builder has t he 4% spread option.. do you ever use that for younger clients? I'm just curious.

As far as the Guarantee builder IUL.. I think it could be a good use of a GUL that will most likely have some cash reserves in case the client forgot to pay. My biggest issue with GUL is the potential of the policy to lapse if someone changes their bank account or has a mispayment for whatever reason. The only issue with the GIUL . . I don't see it as being guranteed to age 121.. Am I missing something? If that's the case ...it's pointless.

 

[scagnt83]

I see .. when I'm illustrating and comparing .. I almost always use their Builder IUL .. I think it all depends on how the agents is selling it.

......

I don't think the Rapid builder has t he 4% spread option.. do you ever use that for younger clients? I'm just curious.

I disagree on all points.

This conversation has to be a "then and now" type of thing because the products have changed so much over the past few years.

Now-
The EC5 outperforms the CV5 assuming the same Credited Rate.

At Preferred Rates and the same Credited Rate, it beats it with and without the Waiver of Surrender Rider.

The EC5 also produces more income, both with and without WOS.


The only real questions are:
1. Does the higher Cap on the CV5 justify running it at a higher Credited Rate?
2. Will they keep the Cap higher in the long run?

My opinions:
You are asking for trouble assuming the higher Cap will yield significantly higher returns in the future.

The next decade will not look like the past decade in the stock market. Assuming Caps will be maxed out as much as they have recently, is begging for an E&O claim imo.

With a moderate market, there will not be a large difference, or even any difference, between an 11% Cap and a 12% Cap.

From a historical standpoint, any Cap over 10% tends to give nominal return when compared at 30/40/50 year periods. Unfortunately, there is a reason the carriers lobbied the NAIC to only show a 20-year lookback on illustrations. Take a look at a 30 or 40 year lookback and it is very revealing.


You can always expect Caps to be lower in the future to some extent at some point in the policy. They might not stay that way, but it can and probably will happen at some point.

Saying "this product will have a higher Credited Rate than that product", is asking for trouble. It is also impossible for anyone to know for sure. Its not a game I play.


Product comparison in the past:
In the past, the normal CV product did outperform the EC product. But not by much. And the outperformance was even less on the income projection.


4% Spread Question:
I dont use it. From a historical standpoint (beyond 20 years) a Cap above 8% beats almost every other option out there. And it is by far the most consistent option. And consistent returns are key with life insurance.

I might use it for a small portion off my allocation. But never for the majority.

You are looking at numbers that include the past decade. If the next decade, looks like the decade before last, a 4% spread will be a horrible option compared to a yearly Cap.

 

[scagnt83]

I think it all depends on how the agents is selling it. A lot of the IUL get sold as a retirement income vehicle at least .. and I'm thinking the builder IUL yields better income projection on the back end. I'm guessing you deal with higher net worth clients who value the flexibility of liquidity.

I deal with both types. But the product itself lends itself to people with assets vs. someone making $50k per year. But "HNW" is subjective. Is someone with $100k in the bank HNW? Maybe, maybe not. I have IUL clients who make under $100k, and those who make well over it.


I dont care how much you make. Everyone values liquidity.
And every advisor damn sure better value it if they care about their clients well being.

A lower net worth client needs liquidity even more than a high net worth client does. It would be more suitable to sell the HNW client the less liquid product, not the LNW client.

The lower net worth client will not have the spare assets in an emergency that a HNW client would. They are the ones who will be the most negatively affected by tying up their money needlessly, when there is a competitive alternative that gives liquidity.


---------


I have seen WAY too many people get caught up in high WL or IUL premiums and then "life happens", and they need to get out. Then they are PISSED that they have sunk $100k into this thing and can only get $40k out of it.

Thankfully, these people are not my clients, but people who come to me for help trying to figure out a solution. You dont want to hear what they have to say about the agent that sold it to them....

Ive seen so much of that, I will no longer sell the normal CV product. No matter what their income or assets are.

I have always shown comparisons in the past. Every single client has chosen the EC product when given a choice, no matter what their income/net worth, even when it gave a slightly lower long term return.

-------

Insurance is about the "what if's" when life happens and the sh*t hits the fan. The less assets a person has, the more they need that "what if" safety net.

A nominal increase in return, is almost never worth a significant loss in liquidity.

 

[DHK]

One can also assure liquidity OUTSIDE the contract - but you have to do a decent fact-find to make sure that's the case - just in case.

 

[jboussea]

I deal with both types. But the product itself lends itself to people with assets vs. someone making $50k per year. But "HNW" is subjective. Is someone with $100k in the bank HNW? Maybe, maybe not. I have IUL clients who make under $100k, and those who make well over it.


I dont care how much you make. Everyone values liquidity.
And every advisor damn sure better value it if they care about their clients well being.

A lower net worth client needs liquidity even more than a high net worth client does. It would be more suitable to sell the HNW client the less liquid product, not the LNW client.

The lower net worth client will not have the spare assets in an emergency that a HNW client would. They are the ones who will be the most negatively affected by tying up their money needlessly, when there is a competitive alternative that gives liquidity.


---------


I have seen WAY too many people get caught up in high WL or IUL premiums and then "life happens", and they need to get out. Then they are PISSED that they have sunk $100k into this thing and can only get $40k out of it.

Thankfully, these people are not my clients, but people who come to me for help trying to figure out a solution. You dont want to hear what they have to say about the agent that sold it to them....

Ive seen so much of that, I will no longer sell the normal CV product. No matter what their income or assets are.

I have always shown comparisons in the past. Every single client has chosen the EC product when given a choice, no matter what their income/net worth, even when it gave a slightly lower long term return.

-------

Insurance is about the "what if's" when life happens and the sh*t hits the fan. The less assets a person has, the more they need that "what if" safety net.

A nominal increase in return, is almost never worth a significant loss in liquidity.

You're preaching to the choir when it comes to the liquidity vs return curve.... but there's always a balance .. My take from your earlier post is that there is not much of a return gain in the CV option to lean forego the EC option. I 'm assuming there is a number that would make that decision tougher for your clients. Most of my clients are not IUL clients so I'm coming from a numbers perspective so it's always good to bring a real world element to these hypotheticals.

But given your take on the two IUL options, should we assume that you would lean toward the HECV option for Mass Mutual over their regular Par-WL product? Would your clients value liquidity enough to go with the 100% liquidity rider that some IUL offer?

 

[scagnt83]

The liquidity question is obviously situation dependent to some extent.

But even people with hundreds of thousands sitting in their bank account, value liquidity greatly in their other financial products. And the less a person has, the more they need liquidity in financial products. (generally speaking)


My point, is most people would rather have high liquidity over a slight increase in returns.


And with Midland/NA, there is now zero reason I can find to sell the traditional non ecv product.