Whole Life vs. Index Universal Life

[dgoldenz]

Re: Whole Life VS Index Universal Life

The problem that I see with (what we all refer to) NO-Lapse UL is that it is NOT a NO-Lapse product. Most companies will run what they call a no-lapse ul, but it is no-lapse based on current assumptions, and designed to run out of gas at age 121... Whoa Nellie... What about a true NO-Lapse product based upon worst case mortality assumptions and guaranteed interest rates...?

Oh, we don't show those becasue then no one would buy that product...

The problem with the NO-Lapse UL is that is should truly be a NO-Lapse or don't use that term. It is one of the most misunderstood and misrepresented products out there today. Yes, the product has some merits, in fact same prem as WL, a good UL will out accumulate a good WL product, but again... based on current assumptions. There is a lot of faith place in the company when buying the UL product.

A no-lapse UL will not lapse no matter what the assumptions are for COI and interest rate credited as long as the premiums are paid every year in full and on time. Even if the cash value hits $0 and stays there, the death benefit stays in force forever.

 

[Dave020]

Re: Whole Life VS Index Universal Life

This is a true statement but when you are comparing it to IUL or and Indec Annuity would be inaccurate...Yes it is true that the index is down from 10 years ago however there have been many positive years in the last ten years that an idexed product would have locked in gains, which is the whole appeal of Index products.

I think that it was Al3 who posted awhile ago about how many years of up markets it takes to get back to ground zero from one year of substantial down market. It was very revealing and maybe he can post it again.

Another thing to remember is that it's a pretty weird investment if when you die, all that money goes away.

Really, with a good mutual par whole life policy the money does not go away, it goes into the death benefit with PUAs. Certainly with a $500,000 policy that pays off an $850,000 death benefit--it's pretty easy to see that the $350,000 additional death benefit from the PUAs are the money back at the time of death.

I am not going to argue performance against other investments, however your statement is incorrect when using dividends to purchase paid up additions.

 

[Mac1958]

Re: Whole Life VS Index Universal Life

MAC, you think that financial advisors are so hard up for "assets under management" that they care about the extra $10 a month in their fees? Actually, in today's market, you might be right.

Another thing to remember is that it's a pretty weird investment if when you die, all that money goes away. Do you tell your clients that? At least if you invest the difference you get that AND the death benefit. (or at a minimum, a lot more crap you could buy over the years)

Briko, I think it's a matter of degree. I suspect that the average Financial Advisor may think, "first it's the Whole Life, then it's the $300,000 annuity." It's the only thing I can think of to explain their virulent hatred of anything but term. If they don't like Whole Life as an asset, fine, but the WL thing sure makes them suspiciously cranky.

Regarding the investment angle, buying Term and investing the difference certainly hasn't worked for many, many people over the last 10, 15 years (even if they DID invest the difference, which is arguable). And, as I mentioned, Whole Life can be used as a foundational asset, and not meant to represent anything approaching aggressive investing.

I work on both sides of this fence, and I believe in balance and simplicity. Term or Whole Life, then appropriate investing. Depends on the person.

 

[insuranceexec]

Re: Whole Life VS Index Universal Life

The problem that I see with (what we all refer to) NO-Lapse UL is that it is NOT a NO-Lapse product. Most companies will run what they call a no-lapse ul, but it is no-lapse based on current assumptions, and designed to run out of gas at age 121... Whoa Nellie... What about a true NO-Lapse product based upon worst case mortality assumptions and guaranteed interest rates...?

Oh, we don't show those becasue then no one would buy that product...

The problem with the NO-Lapse UL is that is should truly be a NO-Lapse or don't use that term. It is one of the most misunderstood and misrepresented products out there today. Yes, the product has some merits, in fact same prem as WL, a good UL will out accumulate a good WL product, but again... based on current assumptions. There is a lot of faith place in the company when buying the UL product.

Key word there SportsNut, Most; not all.

Take a look at the guaranteed offered by both North American and Lincoln. They both clearly state that if the insured is still living then the policy will remain in effect until death with NO further payments. I hope this helps.......

 

[SalemInsuranceGuy]

compare between those two products, which one is better?

This is simple. Neither one is better. They are both situational driven.

If the client wants and needs a fixed death benefit with the premiums guaranteed for life go with the whole life. 100% guaranteed in writing this is the only way to go.

If they need a flexible policy for death benefits and premium payments, are ok without the gaurantees of whole life and seek a potentially higher return based on index performance then do an EIUL.

I will only sell an EIUL at target for the minimum or preferably max funded. If the client wants to do less than target I'd advise them that they're probably better off with term.

 

[jody108]

Re: Whole Life VS Index Universal Life

I have learned things through the years working with funeral homes and clients who are at the end of their life that I'm sure most life agents rarely if ever see.

With most families, before a child or even a spouse takes over the finances for an aging adult who has always been in charge of everything, things have to be going real wrong.

I've seen lawyers and school teachers as well as factory workers that won't turn the finances over to someone else once they become too aged or have signs of Alzheimers or memory loss. Kids and spouses won't force it until it is too late and some damage has happened. It's VERY VERY common.

If an agent sells guaranteed UL and makes the family think it is comparable to whole-life, they are misrepresenting the product in my opinion. It's a good product and has it's place but whole-life is a MUCH safer product.

Well, this all confuses me.

I've been selling whole life and FE only ....

Where does UL have its place?

It seems to me UL has a low rate but if you pay that rate, it will only last 15 years or whatever the guaranteed length is. So it's basically term because the premium rockets so high that it's not worth it.

So you pay more per month to make it last longer. Now you are paying the whole life price.

So why go UL? Just to earn more cash value?

I know you may be laughing because my understanding is mixed up but I would appreciate a simple explanation and when UL has its place.

P.S. I just realized this post I'm commenting on was in the beginning of this thread .. sorry .. i just read some your post on page 2 and 3 and I understand more. However, i wouldn't mind more opinions.

thanks

 

[dgoldenz]

Re: Whole Life VS Index Universal Life

Well, this all confuses me.

I've been selling whole life and FE only ....

Where does UL have its place?

It seems to me UL has a low rate but if you pay that rate, it will only last 15 years or whatever the guaranteed length is. So it's basically term because the premium rockets so high that it's not worth it.

So you pay more per month to make it last longer. Now you are paying the whole life price.

So why go UL? Just to earn more cash value?

I know you may be laughing because my understanding is mixed up but I would appreciate a simple explanation and when UL has its place.

P.S. I just realized this post I'm commenting on was in the beginning of this thread .. sorry .. i just read some your post on page 2 and 3 and I understand more. However, i wouldn't mind more opinions.

thanks

-UL is less expensive than whole life, especially overpriced FE when looking at people in reasonable health. Whole life is usually 2-3x the price.
-UL will probably not build as much cash value as whole life
-UL policies with a no-lapse guarantee will never increase their premiums unless the owner does not pay the premiums on time or in full
-Many UL products are guaranteed forever now (no-lapse guarantee), I'm not sure where you got 15 years from.

 

[Ami]

Re: Whole Life VS Index Universal Life

-Many UL products are guaranteed forever now (no-lapse guarantee).

Is that spelled out clearly (without exceptions/exclusions/conditions/escape wording) in the legal wordings of those contracts?

 

[dgoldenz]

Re: Whole Life VS Index Universal Life

Is that spelled out clearly (without exceptions/exclusions/conditions/escape wording) in the legal wordings of those contracts?

No, every insurance company is just telling you that so they can screw you later.....stop being so critical. Jesus.

The contract will state that the no lapse guarantee will carry the death benefit until the year stated in the policy, which is age 121 for most companies. Right next to that in BIG BOLD LETTERS it will state that failure to pay premiums on time or in full can have a negative effect on the contract guarantees. It's not hard to find.

 

[jody108]

Re: Whole Life VS Index Universal Life

-UL is less expensive than whole life, especially overpriced FE when looking at people in reasonable health. Whole life is usually 2-3x the price.
-UL will probably not build as much cash value as whole life
-UL policies with a no-lapse guarantee will never increase their premiums unless the owner does not pay the premiums on time or in full
-Many UL products are guaranteed forever now (no-lapse guarantee), I'm not sure where you got 15 years from.

With American Amicable, their UL spikes after 15 years ... it is only garunteed for 15 years ... if you don't pay more than the target premium, then you rate increases to an insane amount.

With AmAm, your UL earns a hell of a lot more cash value than their whole life -- but i guess their whole life is only FE and that doesn't seem to earn much cash value.

RNA's is going to be similar ... from what I was told ...

Who is the best company for UL?

Thanks,

jody