Option A vs. B in UL

Oct 11, 2007

  1. Survivor
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    Survivor Super Genius

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    I am wondering what you all think of the option A vs. B in UL.

    Do you all get into the details of this with UL customers, or do you just ask certain questions and make what you think is the best decision for them?

    When do you see option A as being the best, and when for option B?
     
    Survivor, Oct 11, 2007
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  2. James
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    James Guru

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    Option A, it is cheaper and why pay higher premiums for B when there simply isn't much CV built up? Now what you want, is the option to switch to B with a thirty day notice. You build up CV over the years and for one or another reason your life expectency is greatly diminished, you call and switch to B.
     
    James, Oct 12, 2007
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  3. JMO Fan
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    The switch to B is good for the insurer as well as the insured, so the carrier should not require underwriting for the switch (unless you simultaneously increase the death benefit).:yes:
     
    JMO Fan, Oct 12, 2007
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  4. James
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    All that I know of do not require underwriting to switch options. I assume the Insurance Carrier would rather you not if your life expenctancy is articifially low, don't see how it is good for them? Yet, some or many offer it, I'm just wondering how many realize to do it when they age and twenty or thirty years later facing the end of life remember to call and switch?
     
    James, Oct 13, 2007
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  5. JMO Fan
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    Changing to Option B makes the risk constant, i.e., the difference between cash value and death benefit. If a sick person doesn't switch, stops paying premium, cash value goes down (used up to pay premium) under Option A, risk goes up. Awkward to advertise, but the carrier is generally better off if the unhealthy switch to Option B.:embarrassed:
     
    JMO Fan, Oct 19, 2007
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  6. James
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    Option B pays off DB plus CV at death, Option A pays DB only as in level. Now how does Option A have more risk to the carrier? Assuming that a person is paying premiums as scheldule. I must be missing something here or not understanding what you are trying to say.
     
    James, Oct 20, 2007
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  7. djs
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    djs Super Moderator Moderator

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    James - I hate to say it, but your backwards on this one.
    Option A - Increasing death benefit (db + cash value)
    Option B - Level death benefit (db decreases as cash value increases)

    I assume this explains why option A has more risk to the carrier, though slight, since any change would take effect at the time of change, not retroactively.

    Dan
     
    djs, Oct 20, 2007
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  8. James
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    With what carrier? A is level and B is increasing and C is DB plus Premiums.
     
    James, Oct 20, 2007
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  9. djs
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    djs Super Moderator Moderator

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    I didn't realize this changes from carrier to carrier, I don't sell enough life. I just double checked with one. That could explain the problem with this thread.

    Dan
     
    djs, Oct 20, 2007
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  10. djs
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    djs Super Moderator Moderator

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    Life insurance - Wikipedia, the free encyclopedia

    Option A pays the face amount at death as it's designed to have the cash value equal the death benefit at age 95. Option B pays the face amount plus the cash value, as it's designed to increase the net death benefit as cash values accumulate. Option B does carry with it a caveat. This caveat is that in order for the policy to keep its tax favored life insurance status, it must stay within a corridor specified by state and federal laws that prevent abuses such as attaching a million dollars in cash value to a two dollar insurance policy.

    I did have them backwards...

    Dan
     
    djs, Oct 20, 2007
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