UL&WL: Death Benefit - Cash Value = Unfair to Beneficiaries!

[unic.consulting]

The corridor effect will kick in (please forgive me if I'm thinking the wrong term). The insurance company will increase the face amount to keep from violating TAMRA and DEFRA. That or they will simply refuse any premiums that would cause it to violate that. I'm not sure how TA handles those policies.

So if you are using level for cash accumulation, it does suck if they die early in the policy as those extra premiums really did nothing for you. But it definitely pays off later due to the lower cost of insurance.

----------



I'm not aware of any company that will knowingly allow a policy to violate TAMRA. They will certainly act to prevent it. Either by increasing the face amount and/or refunding premiums.

Yes, you are correct as far as I know. I should have clarified my sentence as "make sure they will raise the DB instead of converting it to a paid-up plan."

 

[rousemark]

My biggest mistake with all clients before 2008 was believing that Cash Accumulation was in addition to the Death Benefit with UL policies. That's why I choose the "Level", vs the "Increasing" DB. As Rousemark pointed out, the largest cash accumulation was the goal.

Started choosing "Increasing DB" option after 2008.

Will have to check out the GUL to see what that's about. I'm primarily health insurance, term, Fin Expense, CI, Injury now. Will have to "bone up" on the UL scene.

Thanks all!
ac

----------



They are putting additional premium in the policy, on a quarterly basis. Self Employed family. Not much retirement. Are savings allowed to exceed the Death Benefit? What will the beneficiary get if the DB is $30,000 and the Cash Accumulation is $60,000?

Most companies will allow a client to switch options.. Get an in-force illustration showing what the result would be if they changed to B.

 

[WMG]

Well, you shouldn't have regret, unless it is a completely unsuitable, incorrect, poor, or inappropriate product. That said, you should not feel regret because what you described is criminal. It is not.

In addition, on many UL policies, there is "Option B" or the equivalent, or similar.

Lastly, as far as answers to your specific questions -- insurability is absolutely a factor. A major factor. She was rated! And she is "worse" now! Don't touch that coverage unless you know you have something else, better, and in-force!!! Also, as to question 1 -- you are trying to oversimplify a situation and ask a myopic question, hoping to get a simple answer. Thus, I can't answer that question.

Good luck.

Every time I see a client with Universal or Whole Life policy statement that contains a large Cash Value, I get this feeling of regret.. A part of me regrets that I sold it.

Before 2008, I believed that the Cash Accumulation was in addition to the Death Benefit on Universal Life plans. After all, when the monthly cost of insurance (and admin) is subtracted from the premium, the remainder should be savings that are in addition to the death benefit. Financial common sense..right?

For example, a statement came in today on one of my Transamerica Life clients. (Was "Life Investors / Aegon Insurance Co." in 2006.) She has a $30,000 level death benefit policy, with $21,000 in Cash Value.

If she dies today, the $21,000 in the savings portion of her policy reverts back to the company. To me, that is.. well, CRIMINAL. How would you explain to the beneficiaries that the $21,000 on her most recent statement is being kept by Transamerica?

This client is routinely confronted by the guy who does their business insurance. He tells her that it's unwise to own a Universal Life policy, for the reason described above. Her husband asks me every now and then if I feel that she should stay with the plan. Since she was rated for obesity in 2006, and is bigger now, I tell him that staying-put is best.

1.) If this 47 year old client was in good health, would it be better for her to get a Term Life and put the $21,000 in an annuity?

2.) Are there any good-quality whole life plans out there that accrue cash that is in addition to the death benefit? Or, even better, a "Level Term to Age 100" policy?

Thanks in advance for all constructive responses!
-Allen

 

[unic.consulting]

Most companies will allow a client to switch options.. Get an in-force illustration showing what the result would be if they changed to B.

I've found that a lot of companies will switch from B to A but not reverse.

 

[rousemark]

Don't blame your lack of understanding upon the policy. By all accounts it did exactly what it was supposed to do.

Although, I really have to question what you did to have sold a policy in 2006 for $30,000 in benefit to a woman who is now 47 and have $21,000 in cash value.

It sounds like you really put a lot more premium in than was necessary to simply fund the policy. You probably should have gone with option B. I would definitely get an inforce illustration. There is a good possibility she may never need to make another payment on this policy again.

You do realize we have just completely disqualified ourselves from ever again commenting on the FE forum as a result of our discussing a product other than FE?

 

[VolAgent]

You do realize we have just completely disqualified ourselves from ever again commenting on the FE forum as a result of our discussing a product other than FE?

Fortunately I don't base my self-worth upon what people on the forum think of me. I'd like to be helpful, but it hardly bothers me if I'm not viewed that way.

I only care what three people think of me. The man in the mirror, my son and my wife. After that, I'm not all that concerned.

 

[AllenChicago]

Thanks again Everyone! Since the copy of her statement arrived in my mailbox today, I'm sure hers arrived too.

Will check with Transamerica to see if she can convert from Level to Increasing DB, and if not, what will happen when the CSV equals the DB.

WMG, due to health (obesity), she is definitely staying-put in the plan.
ac

 

[WMG]

Thanks again Everyone! Since the copy of her statement arrived in my mailbox today, I'm sure hers arrived too.

Will check with Transamerica to see if she can convert from Level to Increasing DB, and if not, what will happen when the CSV equals the DB.

WMG, due to health (obesity), she is definitely staying-put in the plan.
ac

Good for you. Explore any and all options -- changing DB from level to increasing, or increasing funding; sometimes you can get "some" increasing DB, up to a point, without underwriting. Is there any term coverage to convert? Any guaranteed insurability riders or options? Something? Anything? Check it all out.

Good luck.

 

[WinoBlues]

Most companies will allow a client to switch options.. Get an in-force illustration showing what the result would be if they changed to B.

Just a note: going from Opt A to Opt B could require underwriting.

Edit: Did not read through and see unic.consulting had already said this.

 

[LGilmore]

Lets see, maybe differences in product but the UL I had available to sell with option A used the cash values to replace the insurance in force. Example 100k death benefit. 40k cash value. Result 100k death benefit consisting of 40k cash value and 60k insurance. A client didn't "lose" their cash values, their amount of true insurance in the policy went down. Term costs still rose, but on the current amount of insurance, not the original face. Opt B simply kept the 100k starter face and added the accumulated cash values to the DB.

You guys didn't have product like that?

The whole life I sold and own, simply created paid up additions over time which increased cv and db.

I have never understood this argument that the insured "loses" anything. The argument itself doesn't make sense.