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Hi David, sorry the delay to answer. Thank you for your help, the facts and positioning. I’m already taking a leap forward here on IULs. Is it fair to say that the IUL is first and foremost a tax-advantage tool? Do you have clients who’ve maxxed out their 401(k) IRAs etc and so get the IUL? And maybe even get term too to pump up the DB?

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BYSFG, thanks for the encouragement! I’m doing just as you say, making my way through DHK’s and scangt’s posts. I’m very glad I found you guys. You say “...the general concept [of the IUL] is there to stay…” I can believe it, it offers so much promise. Even with MEC, seems the extra tax-advantage vehicle is better than not having anything. It’ll be interesting to see how/when IULs visibility and ability to do meaningful comps will improve as it matures and goes through its adolescent rough patches, e.g. will some clients get mondo cash calls late in the cycle like we’re seeing on some of the original ULs? I imagine that’ll continue to get fixed though IUL “vessel” tweaks, more provider disclosure as that market demand rises, better agent and client education, etc.
 
Hi David, sorry the delay to answer. Thank you for your help, the facts and positioning. I’m already taking a leap forward here on IULs. Is it fair to say that the IUL is first and foremost a tax-advantage tool? Do you have clients who’ve maxxed out their 401(k) IRAs etc and so get the IUL? And maybe even get term too to pump up the DB?

If the only advantage to permanent life insurance is as a tax-deferral financial tool, then it should be funded after 401(k), IRAs, etc.

But there's so much more to permanent life insurance (WL or IUL) than just tax deferral. The liquidity and borrowing options make it SUPERIOR to a 401(k)... but ONLY if it is structured and funded properly. And we're even ignoring the death benefit, or even the term rider you could add, which is very important for a family's financial well-being, should the worst occur.

Remember: the death benefit of a 401(k) is the balance, minus taxes.

The death benefit of an IUL & term policy is the death benefit, income tax-free!

This video should help you:
https://www.youtube.com/watch?v=OioTy0oGGpw
 
DHK, what you say “...the non-guaranteed performance is just abysmal right now. I think it's illustrating only a 2% return? It's barely anything over the guaranteed columns…”

I wonder, is Alico’s policy unique in that regard? I’d very much like to see some IUL performance actuals going back to, say, 2000. Or back at least to 2005 or to whenever these IULs really started to take off. I noticed on your PDF, you illustrated at 6.5%, which is lower than the 8%--12% I’ve been hearing about. But even 6.5%, how close to the norm return is that?



Here is the thing about IUL performance. The most important thing is how strong the Renewal Caps and Expenses are. Its the same with WL, what really matters is if they will KEEP paying that Dividend at a SIMILAR level.

When a carrier exits a line of business they have no more real incentive to keep renewals competitive. That is why I only sell IUL from carriers that are deeply committed to the IUL market. Someone like Trans or Axa could cease IUL sales and it wouldnt affect their bottom line at all. But a carrier like NA or LFG is heavily committed to the life market, and the IUL market in particular. If they dont keep renewals strong, then agents will stop selling new policies, and it will hurt their bottom line.


WL is the same. If you look at dividends for carriers like MM, Guardian, NYL, Penn; they are all very strong and competitive. But carriers that no longer issue new WL policies (John Hancock, Phoenix Life, Sun Life, etc.) are not known for paying strong dividends anymore on those old policies.


So imo you have to look at both illustrations and at the position of the carrier in the market.


As far as the performance for inforce policies, I have 6 and 7 year old IULs on the books that are already in the black for the RoR on Premiums. My personal policy is in the black for Premiums.


The reason that the Guarantees of IUL are not strong is because it is not designed to have the same risk as a WL or fixed rate UL. It is a middle ground between UL and VUL. It gives you basic minimum guarantees, something a VUL does not do. And it gives you the opportunity for market linked returns higher than what a fixed rate UL can do.


Many of the carriers have agent info pieces showing stats on the lowest 20 year return over the past 40 years based on a certain Cap. At a 12% yearly Point to Point Cap, the policy would have returned no less than 5% over any 20 year period for lots of the carriers out there.

A properly designed max funded IUL from a strong carrier, can have long term index returns in the 4% range and still not Lapse.

It is not intended to be a completely risk free product. There are special circumstances where it can be risk free... but for general discussion and education sake, it is not a risk free product and should not be marketed as one.
 
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If the only advantage to permanent life insurance is as a tax-deferral financial tool, then it should be funded after 401(k), IRAs, etc.

But there's so much more to permanent life insurance (WL or IUL) than just tax deferral. The liquidity and borrowing options make it SUPERIOR to a 401(k)... but ONLY if it is structured and funded properly. And we're even ignoring the death benefit, or even the term rider you could add, which is very important for a family's financial well-being, should the worst occur.

Remember: the death benefit of a 401(k) is the balance, minus taxes.

The death benefit of an IUL & term policy is the death benefit, income tax-free!


This video should help you:


why would you say it's best to get the WL after 401k and IRAs .. how about people who want a more conservative portfolio than 401k and IRA who don't want like the uncertainty of the tax rate of the future?
 
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