Whole Life or IUL

[js44]

Jackson National is a fantastic example of that scenario. They had very competitive life products, and great financial ratings. But life insurance was less than half of their overall business model.... and over the years, they became less and less competitive, and eventually stopped selling life insurance. Now they mainly just do annuities and investments.

good piece of info to know.

 

[scagnt83]

I know atleast one product which does not lapse but I am not interested in it as I don't want my DB to be guaranteed. I only want my CV to be earning money every year, even if it's 3%.
Guarantee Builder IUL - nacolah-portal.com

I am just putting it out here so you as an agent know it's an option for people who are afraid of lapsing of DB and that you don't go around making such a bold statement.

Now, you will come out and say all kinds of negative things about this guarantee builder IUL to justify you not mentioning. That's just human nature.

I don't know why you didn't think of this product when you made such a statement, maybe you didn't know or maybe it's commission is not worth it. Guarantees are a liability for the insurance company. Why would they pay more commission to push this product?

That is a GIUL, not a true IUL. There is a technical difference between the two products.

G, stands for "No-Lapse Guarantee". You are paying a few thousand extra in fees per year for that guarantee.

But it is not the same type of Guarantee a WL gives. WL guarantees CV. GIUL only guarantees a DB.

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Im not sure why you are getting an attitude with me. All I have done is provide you with facts that you obviously did not know before. Your condescension is unnecessary and out of line.

Good luck to you. I would not take someone like you on as a client in a million years. And I will not be replying to your posts anymore.

 

[js44]

That is a GIUL, not a true IUL. There is a technical difference between the two products.

G, stands for "No-Lapse Guarantee". You are paying a few thousand extra in fees per year for that guarantee.

But it is not the same type of Guarantee a WL gives. WL guarantees CV. GIUL only guarantees a DB.

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Im not sure why you are getting an attitude with me. All I have done is provide you with facts that you obviously did not know before. Your condescension is unnecessary and out of line.

Good luck to you. I would not take someone like you on as a client in a million years. And I will not be replying to your posts anymore.

I already anticipated this kind of response

I merely pointed out that your bold statement was not entirely accurate. Even though there is a technical difference between the two products, No-Lapse Guarantee solves the lapsing on nuclear option, doesn't it? Then you shouldn't make that bold statement there is no such thing as not lapsing under nuclear option. It misleads potential clients to assume they are being unrealistic and go with a riskier product which lapses on nuclear option.

It all comes down to getting agents to show us what we need. Instead of steering us to something we don't need.

Just like clients are looking for good knowledgeable agents who would share things like this product, agents are looking for the average guy who accepts that the market has returned 8% over 100 years. It's less work and more sales even if it's bad for the client. Sorry, I am not your kind of client.

 

[js44]

But it is not the same type of Guarantee a WL gives. WL guarantees CV. GIUL only guarantees a DB.

and Yes, that's why I said "but I am not interested in it as I don't want my DB to be guaranteed. I only want my CV to be earning money every year, even if it's 3%."

But this is one way of solving the nuclear option.

 

[scagnt83]

I merely pointed out that your bold statement was not entirely accurate. Even though there is a technical difference between the two products, No-Lapse Guarantee solves the lapsing on nuclear option, doesn't it? Then you shouldn't make that bold statement there is no such thing as not lapsing under nuclear option. It misleads potential clients to assume they are being unrealistic and go with a riskier product which lapses on nuclear option.Sorry, I am not your kind of client.

No, you made insulting remarks instead of asking questions.

It is technically a different type of product. There is UL, GUL, VUL, GVUL, IUL, GIUL. All technically different products with different purposes. You are on a forum full of insurance agents. We speak in technical terms.

GIUL is designed for Death Benefit protection. If CV is your main goal, GIUL is not a suitable product. It has much higher internal fees vs. true IUL.

And the GIUL pays a higher commission than the ECV product. It is by no means a low comp product. The more fees you pay internally to the insurer, the more the agent makes.

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You dont know half of what you think you know about this subject. And you show no respect for other peoples time or expertise.


But Ive already had 2 consumers contact me based on our conversation over the past 2 days. Thanked me for my expertise and sharing my knowledge. At least 1 will become a client, perhaps both.


This "I know best" attitude will only cost you money. Ive seen people like you lose hundreds of thousands because "they are smarter than some insurance agent". You have constantly made misstatements about how insurance products work and their taxation. Yet you have the gall to condescend my expertise.

Good luck. You will need it.

 

[js44]

No, you made insulting remarks instead of asking questions.

I merely asked why didn't you think of this guarantee IUL when pointing out there is no IUL which will continue when the nuclear option happens. Maybe, shouldn't have brought up commissions since you took it as an insult. If that's the case, I apologize.

We are talking about ways to avoid nuclear option and this is one way of avoiding it even though its not for me.
I am sure you have better knowledge than lot of agents. I am sure, you close new cases everyday. Maybe, you are not right for me, maybe I am not right for you but again this is just a friendly discussion or so I thought.

Thanks for participating and bringing your knowledge to the discussion.

 

[REI_Velocity]

My biggest concern with IUL is the policy imploding down the road. I've asked IUL agent after IUL agent about this and they skirt the issue and proceed to tell me how IUL blows WL away, blah blah blah. Lots of pomp and circumstance. I think some of you are discussing the Nuclear Option, which is probably much of this issue about the potential future of some IUL policies. Basically, from what I understand, is that the potential rising cost on insurance in an IUL needs to get paid by the cash value (or extra cash from the policyholder), and if not, the policy can/will lapse. Is this the biggest Achilles heel of IUL (which is a massive one if this is correct)?

The other issue is that being tied to an index (via options), having a few bad years can greatly destroy any average return (since "average returns" are an absolute farce anyway).

The third issue is IUL has only been around for about 20 years. Sure the various indexes have been around, but LI brings the facets of costs, death benefit, company profits, stockholders, etc to the equation which can put policyholders holding the bag should company philosophies change by desire or requirement.

I'm not an agent, so I have zero vested interest or greed in needing to sell anything... I am a business owner though, so what is the main argument for IUL over WL from a strict numbers and practical stance (as in, Miss Jane will put most of her savings in this vehicle, and commissions shouldn't govern the destruction of her financial future because an agent pushed the product and hype that padded their pockets the most). And when I say WL, I'm talking a tweaked out high cash value policy with PUA's, etc. And by the way, the agent I've used for WL told me that setting it up the way he did with less premium and higher PUAs gives him less commission, not more. I can respect that, as he wanted the best policy for me, his client.

 

[REI_Velocity]

I'm going to dissect this a little bit.



Fair enough.



This was the perspective of IUL when I was working at MassMutual (who didn't understand nor allow their agents to sell IUL).

IUL is a concept that would be hard to back-test, but UL has been around since the late 70's (perhaps earlier). Stock market call options have been around for a long time too. Putting them together makes sense. However, we simply can't back-test accurately due to costs of call options, computerization that would've been required in the 70's (quite expensive, I could imagine), and figuring out the interest rate environment to help determine cap rates.



VUL has, as I'm sure you know as you seem well-versed in this, market fluctuations along with increasing costs of insurance. So, as the market goes down, costs of insurance still come out from lowered cash values in the policy. This volatility makes VUL more susceptible to lapsing.

IUL, by contrast, is not directly invested in any stock market index, but can participate in an index segment upside or not, because of using call options on the insurance company's general account.



It's good to be cautious. I simply wanted to show a logical component to the IUL for the points you made. Most agents can't describe how IUL really works and therefore are unable to manage customer expectations properly.

Thanks for the comments. So is there any area of IUL that is a big question mark for someone decades into a policy. Say a 40-year-old starts an IUL policy. When he's 70 or 80, is there still a lot of uncertainty (with today's eyes) about how the cost of insurance will play in his policy? He'll be more expensive in 30 years than he is today. Are most IUL contracts written to "renew" every year which can include random fluctuations of costs as deemed necessary by the Life Insurance company?

The other question is are there IUL policies written 15-20 yrs or so ago that have stayed true to their illustrations?

 

[DHK]

There are three areas to "manage" in an IUL contract structure:
- Cash values (relative to death benefit)
- Loan interest costs
- Costs of insurance

But there's another area that's probably more important:
I recently spoke with an agent who bought one of the first IULs in 1999... and it was with a decent company at the time, but that company was bought/sold twice since then. Caps on that policy were reduced to as low as 7.5%. Needless to say, that agent doesn't recommend that particular company in its current form any more.

So I would be looking at companies that haven't changed their name or haven't been bought/sold in the past 20+ years. We want companies that are committed to their policyholders. If a block of business has been changing hands too many times, there isn't necessarily much incentive to keep them happy with high caps.

While I'd rather see lower caps than increases in insurance costs, the effects are just as bad - a loss of policy performance.

The other question is are there IUL policies written 15-20 yrs or so ago that have stayed true to their illustrations?

Probably not. Why? Because of how IUL is typically illustrated - using current average S&P 500 average rates as an annual interest credited. Then you have variations in annual caps. About 2-3 years ago, caps were at 14%. Now they hover around 12% - assuming no floor interest rate of 3% (or whatever) to be credited after 8 years (or whatever) if the policy didn't perform at least at that level.

That agent I mentioned above? He does say that his policy's cash values have earned 7.5% per year and he has no problem illustrating that on his recommendations. Of course, he does temper expectations - that if we get 4 great years and 1 down year, it's fantastic for him and his policyholders.

 

[REI_Velocity]

There are three areas to "manage" in an IUL contract structure:
- Cash values (relative to death benefit)
- Loan interest costs
- Costs of insurance

But there's another area that's probably more important:
I recently spoke with an agent who bought one of the first IULs in 1999... and it was with a decent company at the time, but that company was bought/sold twice since then. Caps on that policy were reduced to as low as 7.5%. Needless to say, that agent doesn't recommend that particular company in its current form any more.

So I would be looking at companies that haven't changed their name or haven't been bought/sold in the past 20+ years. We want companies that are committed to their policyholders. If a block of business has been changing hands too many times, there isn't necessarily much incentive to keep them happy with high caps.

While I'd rather see lower caps than increases in insurance costs, the effects are just as bad - a loss of policy performance.

Seems like way more variables for IUL than a good WL policy.

Probably not. Why? Because of how IUL is typically illustrated - using current average S&P 500 average rates as an annual interest credited. Then you have variations in annual caps. About 2-3 years ago, caps were at 14%. Now they hover around 12% - assuming no floor interest rate of 3% (or whatever) to be credited after 8 years (or whatever) if the policy didn't perform at least at that level.

That agent I mentioned above? He does say that his policy's cash values have earned 7.5% per year and he has no problem illustrating that on his recommendations. Of course, he does temper expectations - that if we get 4 great years and 1 down year, it's fantastic for him and his policyholders.

Besides the nuclear option of a policy lapsing, even if that isn't the case, any illustration could totally change since it uses present-day assumptions predicted over many decades. This is another nail in the coffin for me with IULs. Maybe it's just a "me" thing, but my whole philosophy of using permanent life insurance is to have a safe stash for my cash, with predictability - and, oh, by the way, I have some life insurance too. And then it's about leveraging the cash value to pursue actual investments, real estate, financing my life, etc. I took all my money out of the market a few years back, as I can make waaay more money in areas I know and understand, and it's much safer. The WL model for me is a banking system while also a foundational place to filter money through. IUL has so many variables and too many inconsistencies for me while trying to appeal to the masses by getting "market like returns". But again, that's "me" thing and it may make total sense for other people. My guess is most people don't understand the policies to begin with, so they are in the dark and literally trust their agent to spend their lives fortune (or a good chunk of it) on these policies.