Sagicor no lapse GUL, why does it look to good to be true?

[HoosierLife]

Well we just picked up Sagicor so I would like to understand this more. From what everyone else has said over the years on the FE forum, if one payment was missed the guarantee went out the window.

Is this not the case?

 

[jboussea]

Well we just picked up Sagicor so I would like to understand this more. From what everyone else has said over the years on the FE forum, if one payment was missed the guarantee went out the window.

Is this not the case?

I think the guarantee MAY be compromised if one payment is missed. For the insurer it all depends on what has been happening with the underlying interest rate. GUL is still a cash value product but due to the risk that the insurer takes, they retain more cash tahn they would in a regular UL.

 

[Newby]

I sell a few GULs but not to "typical" FE people. And even with sharper people if WL is even close I strongly recommend WL. I've seen GULs go bad as people age. They wouldn't be cheaper if they paid the same % of death claims as WL. They definitely don't in my experience.

As far as voiding the guarantee if they pay one payment late, I don't know if there are any that are that strict. I doubt it. But some are much easier to lose the guarantee than others.

I had a case I'll never forget when I met with an FE lead a few years ago. The lady had just done an app with an agent right before I met with her. She didn't even like the guy. Wanted to do biz with me but he had done an app on a GenWorth GUL at Prefered rate for $25,000. She was age 70 and I figured she would get rated worse than that. So I sold her a Med Sup and told her I would review the policy when I delivered the Med Sup.

Dammed if she didn't get approved with the GUL at preferred. She really hated the agent and said he was not trustworthy (which was correct he is serving time now for selling fake investments to his clients). She gave me every opportunity to do her life insurance but I told her she had the best she could get.

Several years later I'm back at her house when she had called in crazy mad over a rate increase on her Med Sup. I go out there and could tell that she now has dementia. So I'm telling her to stay put and trying to explain all her coverages to her.

I see she now has a 5-Star life policy for $7,000 and the premium wasn't much lower than her $25,000 GUL was. Dirt-bag agent had replaced it on her I figured. I thought that until I happened to meet her daughter a year or so later and brought it up. Daughter told me she had changed banks, got a couple months behind, eventually caught up. But as the daughter explained it the policy was now only guaranteed to her mother's age 77 and she was around 75 when they switched for the 5-Star. And the agent was so nice he let them lie to the insurance company about her dementia (her words).

I know this was just one case but in my opinion GUL is not nearly as bullet proof as WL. And everyone expects to get old and not as sharp. So I try to avoid it. I prefer participating WL. (I use LaFayette and KSKJ for those. )

I don't know who wrote this but it's from someone's blog. And it's pretty much the way I understand GUL.

No-lapse guarantees, or death benefit guarantees: A well informed policyholder should understand that the flexibility of the policy is tied irrevocably to risk to the policyholder. The more guarantees a policy has, the more expensive its cost. And with UL, many of the guarantees are tied to an expected premium stream. If the premium is not paid on time, the guarantee may be lost and cannot be reinstated. For example, some policies offer a "no lapse" guarantee, which states that if a stated premium is paid in a timely manner, the coverage remains in force, even if there is not sufficient cash value to cover the mortality expenses. It is important to distinguish between this no lapse guarantee and the actual death benefit coverage. The death benefit coverage is paid for by mortality charges (also called cost of insurance). As long as these charges can be deducted from the cash value, the death benefit is active. The "no lapse" guarantee is a safety net that provides for coverage in the event that the cash value isn't large enough to cover the charges. This guarantee is lost if the policyholder does not make the premium as agreed, although the coverage itself may still be in force. Some policies do not provide for the possibility of reinstating this guarantee. Sometimes the cost associated with the guarantee is still deducted even if the guarantee itself is lost (those fees are often built into the cost of insurance and the costs don't change when the guarantee is lost). Some policies provide an option for reinstating the guarantee within certain time frames and/or with additional premiums (usually catching up the deficit of premiums and an associated interest). No-lapse guarantees can also be lost when loans or withdrawals are taken against the cash values.

 

[FinalExpenseDojo.com]

In GUL policies it states if the premium is paid the guarantee stays in tact. The guarantee they're referring to is the minimum guaranteed interest rate.

How the policy stays in force is by the cash value having a positive balance. Let's say a GUL has a guaranteed +3% interest every year. No matter how bad the market does, the insurance company will credit at least +3% interest to the cash value which will guarantee the policy is in force until the illustrated age (Sagicor's is 121).

**Example**
If the policy holder misses a payment & the market is -10% that year, the guaranteed +3% is no longer in effect, and the cash value will take a hit. If this happens too many times & the cash value reaches 0 then the policy lapses.

The main difference in WL is no matter what... they give you a specified positive interest rate on your cash value. If you miss a payment that doesn't change. But that's also why it's typically higher priced verses GUL. You pay for the iron clad guarantees.

 

[Newby]

In GUL policies it states if the premium is paid the guarantee stays in tact. The guarantee they're referring to is the minimum guaranteed interest rate.

How the policy stays in force is by the cash value having a positive balance. Let's say a GUL has a guaranteed +3% interest every year. No matter how bad the market does, the insurance company will credit at least +3% interest to the cash value which will guarantee the policy is in force until the illustrated age (Sagicor's is 121).

**Example**
If the policy holder misses a payment & the market is -10% that year, the guaranteed +3% is no longer in effect, and the cash value will take a hit. If this happens too many times & the cash value reaches 0 then the policy lapses.

The main difference in WL is no matter what... they give you a specified positive interest rate on your cash value. If you miss a payment that doesn't change. But that's also why it's typically higher priced verses GUL. You pay for the iron clad guarantees.

Some GULs work very different than you are describing. Many have a secondary guarantee that does not require cash value at all. The policy can go for it's entire projection with zero cash value for most of the years and the death benefit is still in force as long as the required amount of premium is paid each month.

 

[indiana260]

I agree with Newby. Many illustrations I have run with North American show cash value for the first 4-5 years and then 0 for the life of the contract.

My question is... What if I dump 500 extra just in case I miss a payment. Would they then pull from my extra cash to get it to 0.

 

[Newby]

I agree with Newby. Many illustrations I have run with North American show cash value for the first 4-5 years and then 0 for the life of the contract.

My question is... What if I dump 500 extra just in case I miss a payment. Would they then pull from my extra cash to get it to 0.

Paying extra makes a UL policy more stable. If you paid extra every month it would be additional protection that if you messed up the secondary guarantee there would possibly be some cash value to keep the policy in force. That's fine for an agent to understand but your prospects won't understand that. Not the majority of them.

My preferences on younger, healthier people.
1. Participating WL or sometimes non-participating if premium is more attractive
2. UL illustrated stay in force to age 105 (never to age 90 or below)
3. GUL if it's the only way to make the sale. It's not a bad product. But if the customer screws it up they will still blame you.

 

[WinoBlues]

Paying extra makes a UL policy more stable. If you paid extra every month it would be additional protection that if you messed up the secondary guarantee there would possibly be some cash value to keep the policy in force. That's fine for an agent to understand but your prospects won't understand that. Not the majority of them.

My preferences on younger, healthier people.
1. Participating WL or sometimes non-participating if premium is more attractive
2. UL illustrated stay in force to age 105 (never to age 90 or below)
3. GUL if it's the only way to make the sale. It's not a bad product. But if the customer screws it up they will still blame you.

Are you comparing Face amount or Premium?

 

[WinoBlues]

Some GULs work very different than you are describing. Many have a secondary guarantee that does not require cash value at all. The policy can go for it's entire projection with zero cash value for most of the years and the death benefit is still in force as long as the required amount of premium is paid each month.

Agreed. Though I would have said 'most GULs' v 'some'. He seems to be mixing a couple different products together or just posting stuff he has read from someone that does not know what they are talking about.

 

[Newby]

Are you comparing Face amount or Premium?

Whichever they are focused on. Some people have a set amount of coverage they want. Some have a set amount of premium they want to pay. So I start from what they are focused on.