Trying to understand how VUL policy works

[Robert Barney]

To set the record straight, Compulife quotes permanent insurance products, products with guaranteed face amounts and guaranteed premiums. They represent the lowest guaranteed permanent premium products in the market. I wouldn't quote those products if I didn't think some consumers can benefit from buying them. That does not apply to all consumers or even most consumers, but there is a legitimate reason to buy them.

From my experience in this industry for the past 39 years, I have learned that most consumers are woefully under insured. The most common reason is that they have been sold small permanent insurance policies rather than the larger face amount term policies that they actually need.

Too many agents (you can debate the percentage not the fact) are peddling policies rather than educating consumers as to their need for life insurance and recommending appropriate products with adequate coverage.

These comments do not apply to some agents, but in an industry where the consumer is so dependent upon the advice of advisers, I would think that those who consider themselves professional would be looking for ways to out the bad eggs and not so quick to defend anyone and everyone that has an insurance license. You know, that piece of paper you can get after a 3 hour multiple choice exam. And even then, you only have to get 70% of that exam right and now you can sell life insurance.

 

[Robert Barney]

Met others who accidental death who thought they had life inssurance.

Just to be clear, I have never quoted that defective product.

 

[jboussea]

Just to be clear, I have never quoted that defective product.

my point is consumers are unfortunately misinformed about the majority of things they buy including both what you quote and what you don't.

 

[DHK]

Just to be clear, I have never quoted that defective product.

Your bias against the product is too strong, that your words... don't matter.

What is the best, most appropriate market for a VUL policy? It's the BUSINESS market - particularly as a non-qualified deferred comp plan, but can also be used for business succession planning, and/or key man coverage. (InsMark would call it an "Executive Trifecta".) This is above and beyond the need for personal protection that is best secured by term, whole life and/or IUL with principal protections.

And according to the OP, that's the market that this product was sold in - for BUSINESS purposes.

Oh, and you'd have to have securities licenses and registration with a broker/dealer in order to propose that product.

 

[Robert Barney]

my point is consumers are unfortunately misinformed about the majority of things they buy including both what you quote and what you don't.

Yes, but I make an effort to educate:

www.term4sale.com

Some agents are more interested in closing a sale than educating the consumer.

 

[Robert Barney]

Your bias against the product is too strong, that your words... don't matter.

I was responding to a comment about accidental death insurance. Precisely where and why would you recommend that product?

Let me expand further. There is no inherently good or bad product. No one can say this type of product is good or bad, in the absence of a cost and need analsyis.

For example, would $350,000 of fully guaranteed permanent insurance, for a 35 year old male standard non-smoker, for $100 per month, be a good product? A.L. Williams, Ramsey and Orman would say there is no good permanent product and would say that is a terrible deal. They would say avoid that product and buy term. But there are some life companies charging that much for a 30 year term plan. Would the term be better, at the same price. Of course not, that's absurd.

But there are good deals that make no sense. Let's say I can get you a 5 year old, 160HP farm tractor, with 600 hours on it, for $20,000. Is that a good deal or bad deal? If you're not a farmer, why would you even think about it?

The first thing a consumer of life insurance should consider is are they adequately covered. Will their surviving family be properly taken care of financially if they die. What if the family has too little money? I don't care how good a permanent deal is, if the client is under insured term is the first product that needs to be bought. If they need it for 30 years, and can't afford the coverage, go to 20 year.

Once the need is established and satisfied, then each more sophisticated product offering must be carefully analyzed and compared. There are good deals, better deals and bad deals, which is it? I think a life insurance "professional" is someone who helps the client identify their need, then finds their client the best deal available.

 

[DHK]

My mistake. I thought you were talking about VUL (what this thread was about) and there is a lot of bias against that product - myself included, unless it's properly sold with other protection in place.

Accidental death - never sold it. However, I probably would sell it to someone who was otherwise uninsurable. Better to have something in the event of an accident, than nothing. Of course, if they die of a heart attack, it won't do anything... but $20/month to secure $250,000 isn't bad, compared to having nothing.

I have sold Combined Insurance's Accident plan - that has a lot of various coverages.

Accident Protector | Combined Insurance

Accident Protector coverage in California... for only $15.17 per month for an individual.
https://www.combinedinsurance.com/_Global-Assets/documents/US/C-AP-LVB-1-0917.pdf

 

[Robert Barney]

Accidental death - never sold it. However, I probably would sell it to someone who was otherwise uninsurable. Better to have something in the event of an accident, than nothing.

But in all the years you have sold insurance, you haven't sold it. That's the pure definition of a product that is a solution looking for a problem.

I must confess, I did sell it once to a consumer who insisted on buying it in addition to his 10 year term policy. I tried to talk him out of it but he had it on his old policy and wanted it again. He was convinced that it was a good deal.

35 years later and most younger people who need life insurance can buy it for less per thousand than the cost of accidental insurance - where's the sanity in that? But most agents who sell it simply add it to the policy the way a car salesman adds floor mats to a car sale.

 

[pfg1]

I sold one accidental death policy to a client that was uninsurable. He was young enough that likely the only thing in the near future he would likely pass from was an accident. It was better than having zero coverage if that accident happened, and it was not expensive. Hopefully at some point he will become insurable again.

I sell permanent term a decent amount if its the right fit for a client (GUL).

I think most of the regulars here would agree for a professional that has the client in their best interest, that its not about making a sale, but finding the right fit for that client. I'm all for weeding out the bad agents that only chase commissions, and don't really care for the affect it may have on the client.

Right now I have a 66yo client that has 1 year left on his term policy. He IS insurable and WANTS permanent now. He could have afforded it 20yrs ago when he got his term policy, but now its a real stretch. So he may have to settle for another term policy, that he may (and actually will likely) outlive.
Its the opposite deal...he's frustrated that he wasn't offered/explained perm ins in conjunction with his term that he bought. He'd be 20yrs in by now, and whatever he bought would have probably doubled in DB by now. He wants protection for his spouse, and legacy for his kids.

The guru's basically assume nobody needs insurance after they retire and their debt is gone. Well its not always about needs....I know plenty that WANT it, if they can make it work financially. The majority of wealthy folks understand that generational wealth is multiplied through the leverage life insurance provides.

 

[jboussea]

on a side note... why do we call GUL permanent when it has a clear date of expiration