by azeemtn » Fri Apr 06, 2012 06:06 pm
Hi everyone,
This is a great site.
My agent is trying to talk me into a Equity Indexed Whole Life policy with riders for long term care benefits and a rider for minimum return (0%). I am 37 years old, and have 2 young kids and a wife.
I am told there is little to no downside to this type of policy, and that I can even take money from it after a while to take care of medical expenses, or almost any type of expense I want, and that this money would then lower the payout value, but nothing else.
I keep thinking there has to be some downside to this, but I am not smart enough to understand this yet, as the whole concept of life insurance instead of money in a 401K or IRA is still something I am trying to comprehend. Any help would be appreciated as to what I should concentrate on or what questions I should be asking would hep me a lot.
Thanks
This is a great site.
My agent is trying to talk me into a Equity Indexed Whole Life policy with riders for long term care benefits and a rider for minimum return (0%). I am 37 years old, and have 2 young kids and a wife.
I am told there is little to no downside to this type of policy, and that I can even take money from it after a while to take care of medical expenses, or almost any type of expense I want, and that this money would then lower the payout value, but nothing else.
I keep thinking there has to be some downside to this, but I am not smart enough to understand this yet, as the whole concept of life insurance instead of money in a 401K or IRA is still something I am trying to comprehend. Any help would be appreciated as to what I should concentrate on or what questions I should be asking would hep me a lot.
Thanks
Posted: Sat Apr 07, 2012 12:24 pm Post Subject:
Don't buy it. Forget about whether it is good or bad for a minute. You simply should never buy something that you don't understand.
It most likely isn't whole life. It is universal life.
The primary purpose of life insurance should be that somebody needs cash if you die today. If permanent insurance is being purchased, it should because cash is needed/wanted regardless of when death occurs. The PRIMARY purpose of buying any permanent insurance product needs to be the desire to have a permanent death benefit.
Even if that is the case, an insurance policy doesn't replace the need for retirement products like 401(k)'s.
Another way to look at it is that money needed for yourself is better off in investment products while money for somebody else may be better in insurance products.
Posted: Tue Apr 17, 2012 06:56 am Post Subject:
Research the policy he's trying to sell you online by looking up other peer products and comparing the carrier's performance over the past decade. People's opinions on permanent life insurance vary greatly. This EUIL can work in your favor if you can fund its expensive premiums and learn how to leverage PUAs and riders to your advantage. Whole life insurance is actually bought most by rich people who are looking for a tax-deferred safe shelter to keep and grow their money in, so if you're one of them, this may be a good buy. However, you'll find that your policy can only work for you if you know how to use it, so the previous poster has a point. Don't buy it if you don't understand it. The [link removed as per TOU - Lakemen] best life insurance policies are those that take away complications and worries for the person seeking insurance, and lets them rest assured in a sound decision.
Pat Cassidy
Posted: Sat Apr 21, 2012 09:34 pm Post Subject:
Another way to look at it is that money needed for yourself is better off in investment products while money for somebody else may be better in insurance products.
Now that's a solid statement from an agent who knows what he's talking about!
Research the policy he's trying to sell you online by looking up other peer products and comparing the carrier's performance over the past decade.
This has little to do with the policy. All of the various forms of Universal Life (UL/EIUL/GUL/SGUL/VUL) are very complex and there is not enough information online for anyone to get a good understanding of how they work or whether they are right for a particular person.
Here's the thing. All forms of UL policies make promises that CAN come true. However, the likelihood of that happening is relatively small, because it requires "straight line" appreciation in the cash accumulation, which we know is highly unlikely to ever happen.
Whether cash accumulation is illustrated at 5% or 12%, and even if the insurance company actually disclosed its current assumptions (and its future assumptions), no one has ever gotten a straight line rate of return in the stock market, in a related stock index, or from an insurance company over a period of 20 years, let alone from now until age 121 (which could be up to 100 years for a 21-year-old).
A UL policy can be kept on track in any year that it fails to meet the illustrated return by dumping more money into the contract. But many agents never discuss this, most agents wouldn't know how to figure it out, and the vast majority of non-corporate policy owners might not have the kind of money it takes to get the policy back on track if it has been derailed for more than a couple of years.
I just helped a policyowner get her $3,000,000+ UL policy back on track after her agent told her she didn't need to pay premiums for almost two years because "the policy is paying for itself." His whole intent was to cause the policy to lapse. It took a payment of over $102,000 by the owner to get it back on track. Now we'll have to monitor it for the next year or two to make sure it stays on track with the $52,000 annual premiums that were originally illustrated.
The modern UL policies are a big step ahead of the crap the industry created in the 1970s. But, they are still built on the same chassis of ANNUAL RENEWABLE TERM insurance coupled with an UNCERTAIN RATE OF RETURN, which is very different than the straight line ROR illustrated at the time the policy is sold.
Plus, insurance company actuaries are now beginning to write about the fact that current assumptions are faulty and that internal expenses on their UL products are going to have to be increased. The expected number of policy lapses is declining, as people, even in tough economic times, are concerned about their life insurance, of all things, and are beginning to keep their policies longer.
This does not bode well for many policyowners.
Posted: Wed May 30, 2012 04:41 am Post Subject: life insurance
i bought a 200k vul from ameritas in 1998. No broker fees and no surrender charges. overfunded it for years. have over
35k cash value! My in laws lost over 50k cash from a vul sold to them from a friend! I have seen this happen time after
Agents sell these COMPLEX policies to people who have no
idea what their buying. USAA is another great company to buy cash value life. Do your due diligence before buying
Posted: Wed May 30, 2012 03:23 pm Post Subject:
That's a funny post. You've overfunded it for 14 years and have $35,000. If you put in $3,000/yr, you have a negative return. If you put in $2,000/yr, you have a 2.7% return. It sounds like you've taken a fair amount of risk to not have much benefit.
Posted: Thu May 31, 2012 12:07 am Post Subject:
The OP said he
overfunded it for years
but he did not state "overfunded it for 14 years".It sounds like you've taken a fair amount of risk to not have much benefit.
This could be an appropriate comment, or the OP could simply have been allowing cash value to be sacrificed to pay some/all of the cost of insurance and other monthly deductions for some time. If so, it won't continue forever.
My in laws lost over 50k cash from a vul
Believe me, people have lost just as much or more from UL policy purchases since the late-1970s when they first appeared.
Posted: Thu May 31, 2012 04:09 pm Post Subject:
He may not have overfunded it for 14 years. The point was simply that if this was overfunded, it doesn't sound like he got some great return, but his post makes it seem like he thought that he did great.
Posted: Thu May 31, 2012 11:07 pm Post Subject:
his post makes it seem like he thought that he did great.
Agreed 100%.
There's insufficient information to make any kind of decent analysis. We don't know his issue age, we don't know to what extent he "overfunded" the contract, and we don't know what his originally illustrated ROR was and on which his planned premium would have been calculated. He says the policy was issued in 1998, so I'm guessing the initial illustration's "current assumption" would have been around 6%-8% (maybe even higher, which would have been a joke). By 2005-2006, the actual crediting rate would have been closer to 5% and it would be even lower today (perhaps as low as a 4% minimum guarantee), taking the policy way off track.
And even though your comment that his actual ROR was "negative" based on a $3000 annual premium, most UL works that way anyway. Only when the policy is maximum funded (or close to it) in the initial 7-10 years will it show a significantly greater ROR.
Add your comment