VUL information

Prakash Gaonkar

New Member
6
Greetings,

absolutely green horn here.
My background is in Securities (stocks) research. Recently i got interested in UL products and mainly in VUL products. One IUL sells agent contacted me and after talking with him many times, I started studying it more. Unfortunately, he or any of his contacts are not enough knowledgeable to provide info on VUL.

right off the bat, from what I understand, my guess is that, the overhead fees on VUL products should be much lower than IUL product. The policyowner will be taking more risk under VUL and managing own investment (may be like IRA). But I could be wrong, as logical need not be the best available option. :-)

Well I don't know. I have some questions like, how to become VUL agent? series 6/ 63 and state Life insurance? Finra registration? Who Hires VUL agents Full time or part time? etc. Which Insurance providers offers best (or best selling) VUL products?

You can PM me too.
Regards,
Prakash
 
Greetings,

absolutely green horn here.
My background is in Securities (stocks) research. Recently i got interested in UL products and mainly in VUL products. One IUL sells agent contacted me and after talking with him many times, I started studying it more. Unfortunately, he or any of his contacts are not enough knowledgeable to provide info on VUL.

right off the bat, from what I understand, my guess is that, the overhead fees on VUL products should be much lower than IUL product. The policyowner will be taking more risk under VUL and managing own investment (may be like IRA). But I could be wrong, as logical need not be the best available option. :-)

Well I don't know. I have some questions like, how to become VUL agent? series 6/ 63 and state Life insurance? Finra registration? Who Hires VUL agents Full time or part time? etc. Which Insurance providers offers best (or best selling) VUL products?

You can PM me too.
Regards,
Prakash
VUL and IUL are completely different. In general fees are going to be higher with VUL and there aren't any guarantees (except maybe you chose the fixed account in the VUL). You need to be securities licensed.

IULs do not require agents to be securities licensed because they are not securities. The interest crediting is based on on index and often the contract has a guarantee that the amount cannot go below 1 or 0. IULs are closer to ULs than they are VULs.
 
Thanks DaKine. why do you think fees (or overheads) will be higher in VUL than IUL?
in VUL, the cash value account will be managed by the owner. so it should be just a like a Term life insurance plus a investment account that is managed by Owner. where as IUL the cash value account is managed by Provider, which provides a floor (by hedging the s&p Index or Vix may be), invest in different ETFs etc. there is more work and responsibility in IUL. Am I missing something?
 
I fear tht you will find that all too common in the "Cash Value Life Insurance" world.

We are living in the era where s&p500 index based ETFs have management fees less than 0.03 Percent. i,e, 0.36% a year. NO active Human fund manager can provide such service at such low fees overheads. and the passive ETF is more likely to do better than Human.
Also the Trading commissions are ZERO by many reputed brokers now. The so called "floor" in IUL is provided by simple percentage money invested in Heding of s&p contracts.and Vix Volatility contracts. Even there are ETFs for that now. The Finance is getting totally reengineered.

I get the idea of how UL products are constructed. Basically We as humans have decided not to tax Death Benefits of Life insurance. So insurance companies have created innovative products to fit around that. It is still can be a win situation for Client, if one understands the game entirely and wiling to play it till end keeping the policy technically valid as a Life Insurance. ( i.e. death or 120Y). I do not think it is excellent product for everybody, but for few yes.

What i am struggling to understand is the fees and Overheads of different products. I mean detail breakup. That is actually the price of the product (service in this case).
 
Thanks DaKine. why do you think fees (or overheads) will be higher in VUL than IUL?
in VUL, the cash value account will be managed by the owner. so it should be just a like a Term life insurance plus a investment account that is managed by Owner. where as IUL the cash value account is managed by Provider, which provides a floor (by hedging the s&p Index or Vix may be), invest in different ETFs etc. there is more work and responsibility in IUL. Am I missing something?

The policy owner does not manage the investments and if they did God help us.

IUL insurance offers subaccounts that track the performance of stock market indexes without investing directly in the securities which make up those indexes, while VUL subaccounts directly invest in such securities, similar to mutual funds.

Another difference is that VUL insurance, because it features active management of subaccount investments, typically features somewhat higher fees than IUL.

One of the pros of index universal life is that the index-linked subaccounts found in IUL enable you as the policyholder to share, at least to some degree, in the upside performance of the stock market, while shielding you from downside risk if the market declines.
 
We are living in the era where s&p500 index based ETFs have management fees less than 0.03 Percent. i,e, 0.36% a year. NO active Human fund manager can provide such service at such low fees overheads. and the passive ETF is more likely to do better than Human.
Also the Trading commissions are ZERO by many reputed brokers now. The so called "floor" in IUL is provided by simple percentage money invested in Heding of s&p contracts.and Vix Volatility contracts. Even there are ETFs for that now. The Finance is getting totally reengineered.

I get the idea of how UL products are constructed. Basically We as humans have decided not to tax Death Benefits of Life insurance. So insurance companies have created innovative products to fit around that. It is still can be a win situation for Client, if one understands the game entirely and wiling to play it till end keeping the policy technically valid as a Life Insurance. ( i.e. death or 120Y). I do not think it is excellent product for everybody, but for few yes.

What i am struggling to understand is the fees and Overheads of different products. I mean detail breakup. That is actually the price of the product (service in this case).

Here is what you are missing? Will your client have the discipline to continue with their contributions when the market falls and the cash value of their VUL declines 50%. What happens if it declines just before they plan to need it? VULs are a riskier option.
 
just a like a Term life insurance

This is not exactly "true". 99% of term life insurance purchased today is level term life for locked in rates for 10/20/30 years. All UL products internal cost of insurance fees are Annual Renewable Term & increase each and every year in cost as the insured ages.
 
This is not exactly "true". 99% of term life insurance purchased today is level term life for locked in rates for 10/20/30 years. All UL products internal cost of insurance fees are Annual Renewable Term & increase each and every year in cost as the insured ages.
That is absolutely correct. Thanks. I mean it as (Annual Renewable) Term. But thanks for clarifying it.
 
The policy owner does not manage the investments and if they did God help us.

IUL insurance offers subaccounts that track the performance of stock market indexes without investing directly in the securities which make up those indexes, while VUL subaccounts directly invest in such securities, similar to mutual funds.

Another difference is that VUL insurance, because it features active management of subaccount investments, typically features somewhat higher fees than IUL.

One of the pros of index universal life is that the index-linked subaccounts found in IUL enable you as the policyholder to share, at least to some degree, in the upside performance of the stock market, while shielding you from downside risk if the market declines.

Thanks DaKine for the all the replys. May I ask you, if you are authorized to sell VUL products? many times I see strong criticism on one particular Insurance product from People who are not authorized to sell it. The Videos, Articles and die hard proclamation of how some product lines are not so good. Many times it stems from protecting own territory. imho, all insurance products has it's own Unique value. But not every product is suitable for every client/need.
I am new to this sector. from what I know from my domain, a Java software programmer will never claim that how Java is the Super programming language and others such as C++, Python etc. are useless.

The policy owner does not manage the investments and if they did God help us.
With that logic, IRA traditional and Roth IRA should be scrapped.

IUL insurance offers subaccounts that track the performance of stock market indexes without investing directly in the securities which make up those indexes, while VUL subaccounts directly invest in such securities, similar to mutual funds.

VUL need not have only mutual funds. Mutual Funds as well Index (based) funds are similar products. in VUL one should be able to buy individual stocks such as TSLA or AAPL. also It should allow top trade futures of s&p, oil, gold etc. It should not allow any margin products. It will not allow leveraged products such as forex. I am not any Insurance agent. I am just studying the stuff. May be some VUL licensed agent can clarify this please. I could be totally wrong too.

Another difference is that VUL insurance, because it features active management of subaccount investments, typically features somewhat higher fees than IUL.
Does not make sense again. If the client is managing the individual Subaccount (self managed), then the fees should be nothing. If it is Insurer managed subaccount (active managed) then the fees will be higher than similar IUL plan.

while shielding you from downside risk if the market declines.
That is called as Hedge. In IUL i have heard they call it "the Floor". For a knowledgeable financial person, it is simply a hedge, which can be automatically programmed for any account easily using a tiny amount of the cash value. (consider it as insurance on the cash value).
 
Last edited:
Back
Top