Universal Life Question

[usakr]

Wondering if anybody could help me out. I was at an appointment last night and the couple I was speaking with each had a group universal life policy. They wanted to cancel it. I told them not to and then began to tell them the benefits of overfunding the policy just below MEC. Long story short. The husband calls me today and said he called up the insurance company and asked what the maximum premium was that he could pay. They told him he couldn't do that. My question is did I misinform him? I thought you could do that after the 1st policy year with any universal life. Am I missing something? Thanks

 

[dgoldenz]

Why would you want to overfund a group universal life policy anyway? The premiums will increase every 5 years and he will eventually have to buy his own individual policy. You should be trying to move him from his group universal life to a policy that he owns himself if he's in reasonably good health. Ask him to get a statement of both projected and guaranteed premiums at age 50, 55, 60, 65, 70, 75, and 80. He'll probably realize pretty quickly that he should have his own policy.

 

[TristanTLC]

some companies will allow a conversion from a group to individual. I have not done a group policy in a while, so I don't remember all the details. Either way, I advise taking an individual UL policy vs a group UL.

 

[dgoldenz]

some companies will allow a conversion from a group to individual. I have not done a group policy in a while, so I don't remember all the details. Either way, I advise taking an individual UL policy vs a group UL.

If they do allow a conversion it will most likely either be incredibly expensive or continue with the 5-year rate increases, which are also incredibly expensive at the upper ages. It is even more of a difference if he's in perfect health.

 

[usakr]

Thanks for the info. I really don't know too much about unversal life. Still trying to put it all together. So if I'm hearing you correctly the premiums on a group universal life policy will go up every five years? Is it like that with every group universal life? Sorry all the questions but I'm still trying to sort through the permanent maze.Thanks for the help. He's in good shape he's 36 and a nonsmoker with no health problems.

 

[dgoldenz]

Thanks for the info. I really don't know too much about unversal life. Still trying to put it all together. So if I'm hearing you correctly the premiums on a group universal life policy will go up every five years? Is it like that with every group universal life? Sorry all the questions but I'm still trying to sort through the permanent maze.Thanks for the help.

Almost every group policy is based on 5-year age bands. Just ask him to get a projection of premiums both currently for the different age brackets and guaranteed if there is one. Should be an easy case for you to write. Do you know what the face amount is, how much he's spending now, and how old he is?

 

[usakr]

He's paying 59$ a month for $125,000 and $125,000 accidental. He's 36 and in good health.

 

[Full Throttle]

The premiums will increase every 5 years and he will eventually have to buy his own individual policy.

I can't offer advice without knowing the situation, but neither can you. He's talking UL, not term insurance, the premiums won't change year to year if it's adequately funded. If you're talking about the mortality costs increasing within the policy, well yes, but it's the same with an individual policy. What am I missing?

BTW, there are some competitive group/worksite products that offer attractive portability options, and there are some that do not. We don't know, by "group" the client could have been talking about a worksite marketing product that is individually owned as well. Either way, get the facts, then see if you can help him better his situation.

 

[dgoldenz]

I can't offer advice without knowing the situation, but neither can you. He's talking UL, not term insurance, the premiums won't change year to year if it's adequately funded. If you're talking about the mortality costs increasing within the policy, well yes, but it's the same with an individual policy. What am I missing?

BTW, there are some competitive group/worksite products that offer attractive portability options, and there are some that do not. We don't know, by "group" the client could have been talking about a worksite marketing product that is individually owned as well. Either way, get the facts, then see if you can help him better his situation.

I agree, always get the facts first. I'm just going based on general assumptions without talking to the guy personally. We just did a UL case where the person left their job and was given a conversion option to a personal UL policy. It is considered a UL policy, but the premiums still increase every 5 years as if he had never left. Sometimes conversion options will be a guaranteed UL or whole life, but they are usually of the most expensive variety compared to what he could get on his own in good health.

A 36 year old male non-smoker in perfect health could get $125k guaranteed forever with a no-lapse UL for about $50/month. At age 80, he will still be paying $50/month. With his current policy, I'd bet the premiums increase by age bracket. That doesn't mean it necessarily will, but that's usually how group policies work. Get an illustration for his current policy and you can find out for yourself.

 

[Full Throttle]

In general, most individually underwritten policies are more competitive than group policies if the insured can qualify on their own. The human element comes into play as well at time. Here's an example:

I have a client with a 20 year term policy sold via worksite marketing, simplified issue, but expensive compared to the private market. I could easily replace the policy I sold him with a more competitive option, make a new first year commission, but I don't believe it's in his best interest because of the human element. It's the only coverage he has for his family and I would put 80% odds on him lapsing the coverage if it came out of his pocket book instead of being payroll deducted each week. If he was financially responsible, I wouldn't have sold it to him in the first place.