by jeffsmitth » Sun Mar 17, 2013 08:48 pm
I know that this is stupid question that what is prominent Benefit of life Insurance. I think we need to get knowledge about this. Because every person has different benefit and reason.
I want to get views of people about this
I want to get views of people about this
Posted: Mon Nov 04, 2013 08:13 pm Post Subject: IUL with living benefits
Is this not a policy that contains growth (guaranteed) - if the market goes up similar to a Fixed Index Annuity as well as a death benefit and access to the policy should one become ill?
Posted: Tue Nov 05, 2013 04:18 am Post Subject:
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Posted: Wed Nov 06, 2013 12:32 pm Post Subject:
Is this not a policy that contains growth (guaranteed) - if the market goes up similar to a Fixed Index Annuity as well as a death benefit and access to the policy should one become ill?
There is little or no guarantee of growth in any UNIVERSAL life insurance policy. To see that, all you have to do is look at the GUARANTEED columns of a sales illustration, which I promise you will drop to $0 at some point long before the policy reaches its terminal year at age 121.If you are deceived into believing that the NONGUARANTEED elements will hold true forever, that will be to your detriment. The nonguaranteed columns are based on a straight-line rate of return which is 100% unrealistic. Policies sold in the late 1970s and early 1980s were sold based on rates as high as 19% -- and what are we looking at today? 3% or 4% -- the policy minimum guaranteed rate?
Modern IUL policies are as likely to be built on a 0% guarantee as they are a 1% guarantee. Theoretically 0% guarantees no loss of principal, but it fails to account for the annually increasing cost of insurance, which can rise from Year 1 to the last year of the policy 70-100 years from now by hundreds of thousands of percent. I can show you examples of this from real policies. 1% is no better in the face of a 100000% increase in cost of insurance.
Cash value policies do permit access to their cash values in future years, but that assumes there is cash available, which is not guaranteed in any form of life insurance other than WHOLE LIFE, and even that requires payment of the premiums without fail. Borrowing from the policy reduces the CV. UL policies take from the CV to pay the monthly cost of insurance, and when your premium is insufficient to cover that cost, then they begin to deplete the CV, which can result is a rapid downward spiral leading to the early death of the policy.
The only way to possibly prevent this is paying larger premiums in the early years for a longer period of time. Otherwise the policy will demand much larger premiums in the later years which can become unaffordable.
At this point, you cannot equate an Indexed Life Insurance policy with an Indexed Annuity, they sound similar, but they are not at all the same. In the annuity, there will be zero to some growth of cash value, and a future guarantee of lifetime income based on the policy's cash value. But even an Indexed Annuity at a 0% rate of return could lose some principal value due to annual expenses, which would not affect the "annuitized" value of the contract which is guaranteed to be no less than 100% of the premiums paid.
Life insurance has no such guarantee.
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