My First IUL

well, since nobody else is going say it, Congratulations!

Not if it was sold at Target Premium! .... hopefully $200 was Target and the client is paying $300... if thats the case then congratulations indeed. If not, then the policy could be in danger of imploding in future years. (unless GW's IUL is different than every other one on the market..)
 
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yikes on the 8.34%...we look at all IUL products and back test them ourselves using a rolling monte carlo comparison back to 1950. This product would have done 6.59%, 80% of the time, 5.95% 90% of the time. So do run 8.34%, I would estimate that in the 20-30% range...

IUL should min/non-mec always in my opinion. if you are going for db, this isn't what you want to sell.

What program do you use for an IUL monte carlo comparison? Can you actually program a Monte Carlo simulation to include 0's in down years to give you a real rate of return?

With IUL illustrations showing 8.34% wouldn't the yearly net be around 6% after insurance costs...6% really be about 3.5%-4%?

Thanks
 
What program do you use for an IUL monte carlo comparison? Can you actually program a Monte Carlo simulation to include 0's in down years to give you a real rate of return?

With IUL illustrations showing 8.34% wouldn't the yearly net be around 6% after insurance costs...6% really be about 3.5%-4%?

Thanks

The carrier illustrations have their own lookbacks that show historical returns over 20/30/40 year periods. Annuity Rate Watch has a sister company that does IUL, but I cant remember the name at the moment. Go Figure Now will let you backtest the caps/spreads/etc. but you have to enter the specifics.

Over the long term for a fully overfunded policy you can expect 1%-2% difference in Credited Rate and the IRR on CV. The longer the policy is in force the closer to the 1% range it gets. But it will depend on each specific carriers fee schedule and the UW.
 
I am curious... how likely would carriers take out more than current charge or worse, close to max charge? Interest credit rate is pretty low already, so I am not too concerned they will bring it lower down the road.

Anyone has that experience who cares to share? I am not completely confident with straight up UL for perm db; GUL seems to be rather costly and inflexible (if the client have cash flow to continuously fund the premium when they are older). I have been looking at using WL+built in term mix comparing with straight UL.

Feedback? Thanks!
 
No I appreciate all info. IUL was for the payout starting at age 65. Wrote term to make up difference in needed life protection. Illustrated rate was 8.34% Genworth IUL. The IUL was based more on what she could budget every month.

Just curious. Did you design the policy or did your upline?

If it was sold at Target and not overfunded properly then you could still save it and turn it into a properly funded policy, especially if its still in the freelook period.

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I am curious... how likely would carriers take out more than current charge or worse, close to max charge? Interest credit rate is pretty low already, so I am not too concerned they will bring it lower down the road.

Anyone has that experience who cares to share? I am not completely confident with straight up UL for perm db; GUL seems to be rather costly and inflexible (if the client have cash flow to continuously fund the premium when they are older). I have been looking at using WL+built in term mix comparing with straight UL.

Feedback? Thanks!

Internal costs will depend on the interest rate environment and the carriers General Account performance.

Very few policies sold in recent years have been increased to the max charges. Plus the difference between the current and guaranteed charges are not as vast as they were back in the 80s and 90s.

And while a WL cant increase internal costs, they can just reduce dividends which serves the same purpose. Each has their own safeguards for the carrier.
 
Internal costs will depend on the interest rate environment and the carriers General Account performance.

Very few policies sold in recent years have been increased to the max charges. Plus the difference between the current and guaranteed charges are not as vast as they were back in the 80s and 90s.

And while a WL can't increase internal costs, they can just reduce dividends which serves the same purpose. Each has their own safeguards for the carrier.



Bingo!

This is what the true believers in WL over UL or IUL over WL don't get. A lot of this guarantees vs dividend history vs COI increases vs expenses doesn't matter all that much. What matters is a well designed policy from one of the better companies that fits the situation and what your return is in light of the risk and time you took to get it.

Now granted it sounds like the OP did a poor job of designing the thing for his client but the same thing happens with UL and WL.
 
I'm a rookie...but it seems to me like it would be in everyone best interest to just illustrate historical IRR's on the illustration versus the gross return of the index. I'm surprised the carriers can illustrate only the gross numbers because they are irrelevant unless I am missing something???
 
I'm a rookie...but it seems to me like it would be in everyone best interest to just illustrate historical IRR's on the illustration versus the gross return of the index. I'm surprised the carriers can illustrate only the gross numbers because they are irrelevant unless I am missing something???

That is what most carrier illustrations do. Most use the 30 year or 20 year historical return as the default "current" assumption.

The problem with this is that we have had some very high market returns over that time period. When you combine the 90s with the past 6 years there are some very large numbers in there. But when you look at the past 50 or 60 years the numbers are not as high.

Also, when you look at 10 year or 5 year time periods, opposed to long term time periods, the median annualized returns are not as high vs. longer time periods.

This is why all of the carrier illustration systems allow you to enter your own assumed rate that you feel is reasonable. Some of the illustration systems actually give you a warning when you use the default current assumption and suggest you revise it to a lower rate.


Some of the carriers also publish their own analysis of historical returns in a montecarlo fashion. Most IULs can expect 5.5%-7.5%. As picnic already said, 8%+ can be expected a very small amount of the time.
 
That is what most carrier illustrations do. Most use the 30 year or 20 year historical return as the default "current" assumption.

Sorry, still just a little confused. Do you still need to back out fees from "30 year or 20 year historical return as the default "current" assumption". So if the carriers are using 5.5%-7.5%...is that really 3.5%-5.5% net with fees and expenses?

I guess what I am trying to get to the bottom of is when all is said and done after 20 years the CV will most likely grow 3.5%-5.5%?
 
Sorry, still just a little confused. Do you still need to back out fees from "30 year or 20 year historical return as the default "current" assumption". So if the carriers are using 5.5%-7.5%...is that really 3.5%-5.5% net with fees and expenses?

I guess what I am trying to get to the bottom of is when all is said and done after 20 years the CV will most likely grow 3.5%-5.5%?

That is the "Credited Rate" given to the policy as a whole. So yes, the IRR on the CV will be less than that.
When you talk about IUL returns you always want to talk about the Credited Rate. Internal CV returns will differ even with the same credited rate.

The entire block of business will receive that Credited Rate. But there will be many different Rates of Return on CV for that block of business due to the various ages/health ratings/riders chosen/years policy has been in force. The IRR is just a result of the Credited Rate, which is why agents always speak in terms of credited rate since it is the most quantifiable part of the equation.

And for 5.5%-7.5% you can expect 3.5%-5.5% in the short term, 4.5%-6.5% long term (as in 25+ years). Assuming the policy is fully overfunded, decent health rating, and from a decent IUL carrier.


I cant stress enough that you should get the illustration software yourself (the company software not winflex or anything like that). Then just play with the software and learn the product that way. You need to run an illustration and actually read the entire front portion of the illustration called "Illustration Explanation" or "Policy Explanation" or something to that extent. It basically explains the product step by step. I would suggest you get LFG software and play with it, ive found it to be some of the most user friendly IUL software out there. But the best way to learn the product is to run various hypothetical illustrations yourself and to read the first half of the illustration. If you do that you will know twice as much as half the IMOs out there know about IUL.
 
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