Can you elaborate what this statement is based on? Management fees I'll give you, but do you have statistics of cash values of VUL's vs UL vs WL over a decent period of time? I've never seen any, I'd be very curious.
Dan
Variable Life Insurance
- Thread starter zwiepak
- Start date
-
- Tags
- life insurance
Can you elaborate what this statement is based on? Management fees I'll give you, but do you have statistics of cash values of VUL's vs UL vs WL over a decent period of time? I've never seen any, I'd be very curious.
Dan
- Thread starter
- #22
IMO, like I mentioned before, I really don't think there's a good place for a VUL unless they've maxed out their IRA's... That's really the only condition I can think of.
That being said, I just wanted to comment on REAL permanent products keeping their cash values...
...a serious liability to insurers. It's no wonder insurers these days are pushing the crack cocaine of insurance products:
The "guaranteed" death benefit UL.
Statements you'll never forget:
"Hey wait, where did my cash value go???"
- 403
Life insurance, whether WL or UL or VUL, is not all about cash values. Products with lower cash values charge lower premiums, but can pay the same death benefits. Tax-free death benefits cost less than taxed funds.
If VUL is bought to pay estate taxes, cash value is likely to rise as inflation, interest, & investment values rise, which can increase the death benefit. If inflation, interest rates, & investment values are low, estate value, and its estate taxes, won't rise much either. Under most VUL designs, the death benefit won't drop with cash values, so VUL would still pay them.
If VUL is bought to pay estate taxes, cash value is likely to rise as inflation, interest, & investment values rise, which can increase the death benefit. If inflation, interest rates, & investment values are low, estate value, and its estate taxes, won't rise much either. Under most VUL designs, the death benefit won't drop with cash values, so VUL would still pay them.
UL's are often sold as a kind of savings plan or an alternative to a bank account to people who do not know better. It happened alot in the early late eighties/early nineties when interest rates in a UL paid something like 10%. I'm not a huge fan of regular UL unless its for estate planning purposes usually for someone too old for other types of insurance to be practical.
The VUL works well for people with income too high to contribute to a roth IRA and a high enough tax bracket to make the tax free returns worth the other risks and costs. In southern CA where incomes and living expenses are very high many people are above the contribution rate.
Maxing out tax deferred plans has limited benefits as tax rates are likely to rise considerably in the future ruining most of the advantages of tax deferral. This is likely to have the greatest effect on the people too highly compensated to contribute to a Roth hence the VUL. Obviously maxing a company's matching contributions to a 401K is a must.
Many financial planners speak ill of permanent insurance for the same reason many insurance agents speak well of it: that is what their company told them to say. CPA's focus on tax deferral because they want to look good to their clients in the short run. But by saving them taxes now not 20 years from now in retirement they are creating potential tax liabilities when their clients are least able to handle them.
The VUL works well for people with income too high to contribute to a roth IRA and a high enough tax bracket to make the tax free returns worth the other risks and costs. In southern CA where incomes and living expenses are very high many people are above the contribution rate.
Maxing out tax deferred plans has limited benefits as tax rates are likely to rise considerably in the future ruining most of the advantages of tax deferral. This is likely to have the greatest effect on the people too highly compensated to contribute to a Roth hence the VUL. Obviously maxing a company's matching contributions to a 401K is a must.
Many financial planners speak ill of permanent insurance for the same reason many insurance agents speak well of it: that is what their company told them to say. CPA's focus on tax deferral because they want to look good to their clients in the short run. But by saving them taxes now not 20 years from now in retirement they are creating potential tax liabilities when their clients are least able to handle them.
- 105
I think if you buy young enough and overfund, it could be useful. But most agents do not sell based on that. One feature to VUL's, clients can lower their premiums after two years. The problem? It can create a lapse issue later on when it's too expensive to move into a different permanent plan. I sold VUL's when I was new in the business and wish I never had. Permanent life insurance is not permanent when the policy's long term viability rests with more than the client simply paying the premium. If the investments are bad or placed in low returning funds, not good. IMO.
