Replacing Universal and VUL policies

[crk007]

I seem to be running across more UL and VUL policies lately. I know these are typically not a good fit for our FE type clients to have because they are quickly going to be upside down in their policy.

Does anyone know of an app or a plug in calculator that can show a prospect when and how quickly their policy is going to be depleted unless they start making big time increases in their premium payment.

 

[DHK]

Compare premiums being paid... to costs of insurance... to the earnings of the policy.

If premiums stop, policy will eat up the cash values via costs of insurance being offset by policy earnings.

If earnings are low, the policy will eat up the cash values via costs of insurance being offset by premiums paid.

Either request an in-force illustration from the carrier, or simply show how all three of these factors work and take an educated guess as to how long the policy will last. The lower the performance/premiums... the more the policy is "on life support".

 

[shonceman]

If the policy's been in force for a number of years, ask to see their last annual statement. If they have it, that should show you what's coming in (premiums & earnings) and what's going out (cost of insurance and fees). It should also show beginning and end of year cash value. Often these policies are already losing money by the time you get to them. Other than the statement, you're going to have to call the carrier for an in-force illustration, as DHK suggested. I don't know of any app that could do this. There are too many variables

 

[scagnt83]

Most annual statements will tell you a lapse date based on current premium payments.

Some annual statements will also have an inforce illustration with them.

Like others said, compare the expenses being charged with the interest being credited. Or contact the carrier and ask for an in-force illustration.


However, be careful just assuming every UL or VUL you come across is a pending lapse. Yes, many were not funded correctly and assumed interest rates would stay at 10% forever. But there are plenty out there that are perfectly stable and funded correctly from the start.

Of course most people with policies like that are not interested in talking to a new insurance agent... which is why we often see failing ULs out in the field much more than viable ULs.


But any agent that makes blanket assumptions about how UL or VUL is going to lapse and needs to be replaced doesnt know what they are talking about.

With the current bull market, I would be highly suspect of an agent saying a VUL is about to lapse. Unless the client just stopped paying premiums very early in the policy.

UL is much more likely, especially if sold in the 80s or 90s. But ive seen LOTS of high quality well performing ULs that were sold back then. And it would be downright negligent to replace them.

 

[shonceman]

Most annual statements will tell you a lapse date based on current premium payments.

Some annual statements will also have an inforce illustration with them.

Like others said, compare the expenses being charged with the interest being credited. Or contact the carrier and ask for an in-force illustration.


However, be careful just assuming every UL or VUL you come across is a pending lapse. Yes, many were not funded correctly and assumed interest rates would stay at 10% forever. But there are plenty out there that are perfectly stable and funded correctly from the start.

Of course most people with policies like that are not interested in talking to a new insurance agent... which is why we often see failing ULs out in the field much more than viable ULs.


But any agent that makes blanket assumptions about how UL or VUL is going to lapse and needs to be replaced doesnt know what they are talking about.

With the current bull market, I would be highly suspect of an agent saying a VUL is about to lapse. Unless the client just stopped paying premiums very early in the policy.

UL is much more likely, especially if sold in the 80s or 90s. But ive seen LOTS of high quality well performing ULs that were sold back then. And it would be downright negligent to replace them.

My goal is usually not to replace if it's possible to salvage the existing policy, either by increasing premiums or reducing face if necessary. I agree that it's irresponsible to assume the policy is underfunded. I sold a few UL policies in the '90's and always geared the premium to the guaranteed values, not the illustrated values. So if the client paid their premiums in a timely fashion and hasn't touched the cash value, their policy is as safe as any WL. But a lot of these policies were sold back then by agents who didn't really understand how the policy functioned, and neither set them up well nor effectively explained them to the client. So they may be severely underfunded. Replacement may or not be the right thing to do, but the client's best interest MUST be paramount.

 

[WinoBlues]

Good thread.

There used to be a lot of misinformation on ULs here. A lot of blanket statements.

As the other guys have said the annual statement or inforce is going to be the strongest piece to use. The illustration with the policy could help in that it will have the guaranteed values. Using the company information is stronger than some app.

If you have the original illustration call the company
from the person's home and compare what the illustration.

Collect annual reports and illustrations from different companies and study those. Learn to read them.

 

[crk007]

Thank you for all the feedback. I was sick over the weekend so was not able to reply. I have never replaced a UL policy simply for the fact that they are hard to see exactly what is going on at that exact moment and when a policy would lapse. I err on the side of extreme caution when it comes to replacing policies.

Sounds like requesting the in-force illustration will be the only way to really know.

Every UL policy I have run into (which admittedly is only about 1 per month) the client is already either losing cash value or someone from the current carrier called them and told them they had to reduce their face to keep their policy because they could not afford an increase in premium. In each case I can recall the person was only in their 50s and it just seems like if they are already having problems with the policy it will only get worse as they get into their 60s, 70s, and beyond. These were all fixed income folks (at least they were when I met with them, maybe not when the policy was first sold) with no means of paying an ever-increasing premium.

 

[PA Bill]

Apples and Oranges. If you specialize in FE, then do so. Compliment them on having the forethought to purchase life insurance then position your FE policy as something in addition to and altogether different than what they have (stress the guarantees!). Don't concern yourself with what they already have, sell what you have.

You're really slowing yourself down getting into that muck. Call the company for an in-force illustration? Seriously?

 

[WinoBlues]

Apples and Oranges. If you specialize in FE, then do so. Compliment them on having the forethought to purchase life insurance then position your FE policy as something in addition to and altogether different than what they have (stress the guarantees!). Don't concern yourself with what they already have, sell what you have.

You're really slowing yourself down getting into that muck. Call the company for an in-force illustration? Seriously?

I do not disagree with you, but he asked.

 

[Rirwin]

Apples and Oranges. If you specialize in FE, then do so. Compliment them on having the forethought to purchase life insurance then position your FE policy as something in addition to and altogether different than what they have (stress the guarantees!). Don't concern yourself with what they already have, sell what you have.

You're really slowing yourself down getting into that muck. Call the company for an in-force illustration? Seriously?

It’s unfortunate but when I joined this business I was told to be a jack of all trades and it seems that is what most newer agents are doIng. They are so afraid to lose a sale that they start chasing which ultimately is making them miss out on much more sales in the big picture.