Variable Life Insurance

Thing is, calling a VUL "permanent insurance", IMO is stretching it. Your fund tanks, your COI's go up and suddenly you find yourself having to fork over $ or you contract lapses.... I know that's sort of an exaggeration to illustrate the point, but it does its job.

Now, I've seen VUL's with minimum guaranteed death benefits, which I suppose gives SOME credence to the "permanent insurance" label, but still, if you think about it, what truly is the point of a guaranteed minimum death benefit on a VUL??? :D

IMO, it's like building a Lamborghini with a slightly bigger space between the driver and passenger seats, and making a point to advertise it as space for a child's seat and stroller...

Exactly what problem are you trying to solve for your client? What percentage of VUL's where people are paying premiums have you seen implode due to market changes?

Permanant life insurance is a bit like having a home with a mortgage. You own it up till the time the bank says they do. Hopefully, anyone getting a VUL understands the risk associated with it, and their agent helps them manage it effectively.

Dan
 
Term isn't likely to pay anybody's estate taxes if they die at 85. Most insurance buyers will live that long. VUL might match their risk the best. (No, I don't sell any. I regulate it.)
 
What percentage of VUL's where people are paying premiums have you seen implode due to market changes?

Many that were sold by agents that recommended minimum funding.
 
Good grief, you're beginning to make me think your a Democrat..... here is what I said.....

I'm really am amused at the number of agents (particularly life agents) that simply will not let go of the "permanent" life argument... even though there isn't a financial planner around that would back-them up.... unless you've ..................... maxed out your retirement plans and have millions in assets. (emphasis mine).

The point remains that I would never suggest that someone buying vul, imo or any permanent life product did a "horrible" thing. In the scheme of true financial planning it isn't considered the "wisest" thing to do with your money... albeit, a perfect world!

We, as advisors, are supposed to look out for the clients "best" interest... this is the equivalent to me, of YOU pushing a product that requires let's say a $200 a month investment for a $150,000 product when you know down deep they need $850,000 of coverage, which could have been easily purchased with the same $240.

But..... perhaps you should go to Bob Castiglione's school of LEAP and really get in the game. You won't get this old life guy to agree with you, UNLESS of course you've maxed out retirement plans and have millions in assets.
 
What percentage of VUL's where people are paying premiums have you seen implode due to market changes?

Many that were sold by agents that recommended minimum funding.

Touche! But shoot the agent. This didn't put the clients needs first.

Dan
 
The purpose of permanent life insurance is usually to reduce risk. A VUL has a rather large risk of crashing as funds are withdrawn to supplement retirement. You could try to leave a cushion but that seems to defeat the purpose of money available for retirement.

The argument against regular WL especially custom pay WL (which usually has higher IRR) should erode as interest rates and tax rates rise in the future. When I first securities licensed I thought WL was BS until I really looked at how disappointing mutual funds and VUL's often times perform. Not that they don't have their place.
 
The purpose of permanent life insurance is usually to reduce risk. A VUL has a rather large risk of crashing as funds are withdrawn to supplement retirement. You could try to leave a cushion but that seems to defeat the purpose of money available for retirement.

The argument against regular WL especially custom pay WL (which usually has higher IRR) should erode as interest rates and tax rates rise in the future. When I first securities licensed I thought WL was BS until I really looked at how disappointing mutual funds and VUL's often times perform. Not that they don't have their place.

Huh? If funds are being systematically withdrawn, why would they be exposed to the market? Shouldn't a good agent advise to move them into something more stable, such as the money market account?

I'm amazed at how many people think that VUL's should be the swiss army knife of everything (i.e., insurance AND retirement funds AND investment AND college education AND house downpayment AND anything else), and then make comments that they don't work well as a swiss army knife.

Again, it's all about the clients goal, and the best way to get there.

Dan
 
Huh? If funds are being systematically withdrawn, why would they be exposed to the market? Shouldn't a good agent advise to move them into something more stable, such as the money market account?


I understand your point but the rising mortality charges as well as management fees inherent in any VUL policy will quickly erode a VUL invested in safe places causing it to underperform. That being said there are still many financial situations out there where a VUL is very appropriate as part of an investment strategy. It simply is not the magical financial product many agents (especially newly securities licensed) present it as.
 
I understand your point but the rising mortality charges as well as management fees inherent in any VUL policy will quickly erode a VUL invested in safe places causing it to underperform. That being said there are still many financial situations out there where a VUL is very appropriate as part of an investment strategy. It simply is not the magical financial product many agents (especially newly securities licensed) present it as.

I'm still not following. Rising mortality charges - doesn't matter it's a VUL, all permanent policies have this, and can erode cash value.

Management fees - watch the VUL, but watch any permanent policy. Names may change on the fees, but they are there.

Is your concern specifically about VUL's, permanent policies, or the random agent that doesn't have a clue?

Dan
 
I don't have a problem with permanent policies as a concept. My problem is with agents who sell VULs to people who cannot handle the fluctuations and don't understand the risks.

The management fees on WL policies built in pretty well and they tend keep their cash value far better than UL's and VUL's. This is especially the case when they have customized pay periods. Granted WL has its cons as well.
 

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