Whole Life vs. Universal Life

[LGilmore]

In my experience the biggest problems with UL's has been the minimum premium sale and the client learning the product is Flexible.

The minimum premium is an illustration based on absolutely NO changes to the crediting of the policy. Where most blow up is crediting rates change or the Flexibility word comes into play.

For most clients when they hear the word flexibility about the premium their brains register "I don't have to pay premiums anymore." It is a blessing and a curse...

It's a blessing during a financial hardship that allows a client to stop premiums and let the policy pay from within.

It is a curse for the same reason.. simply because it stops being a Bill that needs to be paid. Most people pay bills by what needs to be paid, not by what should be paid. Lettting a policy run itself for a year or two leads to the insured simply running out of coverage because they forget that it's a bill.

There's nothing "wrong" with universal life in itself, it's how it's sold and more importantly how it's understood by the client.. For those folks who made it a bill and kept it a bill, it's doing what it's supposed to. How many of those folks are out there?? well.... I don't know.

Whole life is sold as a bill from day one. It ain't "flexible" for 20 years. Someone paying a bill for that long and seeing results, tends to keep paying that bill, because that's when that bill pays you back. I love the fact I gain double in cash value increases compared to what I put into it each year now. But for me, it's always been a bill.

 

[Newby]

Re: Whole Life -versus- Universal Life

There really is no difference between whole-life products sold by stock or mutual companies. Mutual companies are just owned by the policy holders instead of stock holders.

If you mean participating and non-participating policies, the basics are still the same. The only difference is that you MAY get a dividend which can be applied to premiums or used to purchase paid up additions.

The basics of straight whole-life are still the same. The policy is designed to increase the cash value (self-insured amount) each year and reduce the coverage (insured amount) by the same number each year.

At some point it endows (cash value equals the death benefit) and you are fully self-insured. On modern policies that has to be no earlier than age 95. On real old policies, they could endow at younger ages which was a great deal to the policy owner.

UL doesn't work like that.

For those attempting to explain whole life... please understand there is a real difference between "whole lifes" sold by mutual companies and stock companies.

There different versions of whole life some credit an interest rate others pay the guaranteed rate AND dividends.

Dividends are the silly putty of insurance as they are not taxable income but can be received as cash, or used to reduce the cost of insurance (term in reverse), held at interest(those gains might be taxable...it's been awhile) or used to buy paid up insurance increasing the face amount of the policy and increasing the dividends paid in the future.

 

[LGilmore]

"There really is no difference between whole-life products sold by stock or mutual companies"

Yes, there is. sorry it is the par and non par aspect. If you haven't sold a par product you don't understand the difference. It is the use of dividends in the enhancement of the policy's death benefit and cash values that is very much different than what a stock company can offer. I'd much rather offer a whole life from a mutual company than a stock. I own whole life and what I am saying about dividends is VERY correct. thanks. Actual use of dividends over the years my friend, they are quite flexible and viewed favorably by the IRS.

"you MAY get a dividend "

Name a company that's skipped one....

 

[Newby]

You are confusing participating and non-participating policies with stock and mutual companies. As a rule, most companies that sold participating policies were mutuals, but not always. Most stock companies do not pay dividends but not always.

Not all mutual companies pay dividends.

Some stock companies continue to pay dividends (Met Life, Prudential etc.)

Some companies can claim to have paid dividends every year but the dividends have been so small at times that they are not meaningful.

Many mutuals don't pay dividends at all or rarely pay them.

There are NO stock or mutual companies that will guarantee to pay a dividend. None. Never has been. Never will be.

But the original question goes back to what the difference is between traditional whole-life and Universal life.

With traditional whole-life it can be participating or non-participating. Participation doesn't change the structure of the product. It's a product that is designed to add to your self-insured portion each year, and reduce your insured portion. It's different than UL.

"There really is no difference between whole-life products sold by stock or mutual companies"

Yes, there is. sorry it is the par and non par aspect. If you haven't sold a par product you don't understand the difference. It is the use of dividends in the enhancement of the policy's death benefit and cash values that is very much different than what a stock company can offer. I'd much rather offer a whole life from a mutual company than a stock. I own whole life and what I am saying about dividends is VERY correct. thanks. Actual use of dividends over the years my friend, they are quite flexible and viewed favorably by the IRS.

"you MAY get a dividend "

Name a company that's skipped one....

 

[LGilmore]

"There are NO stock or mutual companies that will guarantee to pay a dividend. None. Never has been. Never will be."

Did I say that?

And which companies that are mutual (not demutualized) that aren't paying dividends. Could you enlighten me?

Where are you finding your information, I'd love to take a look.

"It's a product that is designed to add to your self-insured portion each year, and reduce your insured portion. It's different than UL."

under this definition how so? What you're describing is level DB UL.

I use my PUA every year to buy paid up insurance which continues to produce dividends and in turn buys more paid up additions. If you are only trying to lay claim to the guaranteed part that's one thing, but my friend I GET dividends every year and both my death benefit and cash values increase.

So maybe I'm not getting your point. Could you start with the mutual companies that aren't paying a dividend? thanks.

 

[Newby]

My intention was to help the the original poster understand the difference between whole-life and UL. Not to have endless back and forth argrueing on a different topic.

That being said, I don't see how you can take anything I've said as being anything less than factual.

Traditional whole-life is designed to build cash value (the self-insured portion) and the balance of the death benefit is the insured portion. Each year the policy holder becomes more and more self insured (cash value grows, the company insured portion reduces.) I don't know how to make the explaination any clearer than that. Dividends don't really change this, they just make the explaination harder for him to understand. If there are dividends, they can be used to reduce the premium amount, add additional paid up insurance or just be paid to the policy owner.

Your use of the terms stock company and mutual company when you mean participating and non-participating policies is incorrect.

Many mutual companies offer non-participating policies as well as participating. There are hundreds of examples. One of the newest ones that is often discused here on the forum is Shenandoah Life's new Vista product.

For example: Shenandoah Life is a mutual company. The Vista product is a whole-life non-participating policy. That is why I say you need to NOT say mutual policy when you mean dividend paying (participating) or stock company when you mean no dividends (non-participating.)

Prudential is an example of a company that has participating policies even though they are now a stock company. They actually started as a stock company, then mutualized, then later demutualized.

The thing we both agree on is, it is better to have a participating policy than non-participating.

"There are NO stock or mutual companies that will guarantee to pay a dividend. None. Never has been. Never will be."

Did I say that?

And which companies that are mutual (not demutualized) that aren't paying dividends. Could you enlighten me?

Where are you finding your information, I'd love to take a look.

"It's a product that is designed to add to your self-insured portion each year, and reduce your insured portion. It's different than UL."

under this definition how so? What you're describing is level DB UL.

I use my PUA every year to buy paid up insurance which continues to produce dividends and in turn buys more paid up additions. If you are only trying to lay claim to the guaranteed part that's one thing, but my friend I GET dividends every year and both my death benefit and cash values increase.

So maybe I'm not getting your point. Could you start with the mutual companies that aren't paying a dividend? thanks.

 

[myinsurebiz]

This is exactly why I said screw UL . . .

Give me plain ole Whole Life - Non Med, Final Expense - take it or leave it . . .

Term with ROP would serve the same purpose.

Either way - I'm sticking with NonMed and if they qualify for underwritten, then I'll quote it through Baltimore Life or Shenandoah and move on . . .

Tom

 

[retread]

...I would really appreciate some more of these comments on the pros and cons of W/L, specifically in regard to Final Expense (Simplified Issue).

... In the meantime, will someone throw some fuel on the fire about Simplified Issue?

Whew! I'm glad the debate over stock/mutual, par/non par, UL discussion is over. I didn't learn much new in this debate, since Newby re-iterated the basics taught in Life Insurance 101. Newby is straight down the pike, and LGilmore (although seems to have mixed the terms) brings up some interesting applications, but I and some others want more discussion on Simplified Issue.

Someone please summarize the debate over the pros and cons of Simplified Issue. I know what it is... I just I want to know the issues with it.

 

[LGilmore]

"Simplified Issue"

Pricing. Simply put, the fewer the questions, the greater the premium. If you are of questionable health, simplified issue might be a smart way to go. If you are as healthy as an average person or better. It isn't a good way to go.

 

[retread]

"Simplified Issue"

Pricing. Simply put, the fewer the questions, the greater the premium. If you are of questionable health, simplified issue might be a smart way to go. If you are as healthy as an average person or better. It isn't a good way to go.

Thanks. I noted that, too, and you have a good point.

Anyone else?