by pwhiteonlexington » Wed Feb 25, 2009 04:43 am
My mother is 84 years old and in pretty good shape for her age. We have no insurance to help with home going services though, when she leaves us. We just want to be able to provide a decent resting place for her without hassle; but she won't make the arrangements..
Posted: Mon Apr 20, 2009 09:06 am Post Subject:
Okay, the concept of second to die seems right for couples with large volume of estates to leave behind upon which their heirs are needed to pay taxes, am I right? So its sounds more like a tax planner than a life policy.
Posted: Mon Apr 20, 2009 09:20 am Post Subject:
yes rupert !!
its really related to tax planning and its benefits for one's kids.Nice option for those who are high net worth clients. But its agent's work to cover all the basic information about the product while explaining the policy benefit to the client as in most of the cases client is hardly about the allied benefits of the insurance policies.
:wink: :wink:
Posted: Mon Apr 20, 2009 11:34 am Post Subject:
The cash value will be close to zero. However, this has nothing to do with the age of the insured. It has everything to do with the type of policy. This would be a guaranteed universal life policy. These policies are designed strictly for a guaranteed death benefit. If whole life was used, it could build a significant cash surrender value.
The purpose of a second to die policy is to leave money behind at the second death. The ownership structure of the policy is what is used to control the taxation.
Posted: Mon Apr 20, 2009 01:39 pm Post Subject:
The age is relevant to the cash value because of the significantly higher cost-of-insurance component of the UL policy than someone for someone who is 80 years old rather than 30 years old. Either way, there will be minimal cash value on a $250k UL for an 80 year old man.
Posted: Mon Apr 20, 2009 02:10 pm Post Subject:
The age isn't relevant. The type of policy and the structure of the policy is relevant.
If a 30 year old buys a Guaranteed Universal Life policy, the cash surrender value will always be $0 or close to it. The same is true for an 80 year old or any other age.
On the other hand, if the 80 year old funds his UL with $30,000 instead of $14,000, at age 90, he is probably looking at close to $275,000 of cash value. That's not minimal.
Keep in mind that with a UL, when a 30 year old buys it, he is still paying the rates of an 80 year old when he turns 80.
The UL has minimal cash value because you are designing the policy in that manner. It has nothing to do with the insured's age.
Posted: Mon Apr 20, 2009 02:22 pm Post Subject:
I am assuming with only the premiums paid and no additional money lumped in. If an 80 year old pays the annual premium, the cash value will always be close to $0 because of the high COI. If a 30 year old pays the annual premium, the cash value will increase over time because the COI for his age is much less than the COI at age 80. The higher COI at later ages reduces the cash value.
The 30 year old is still paying the rates of an 80 year old at that age because of the COI, but all of the level premiums paid in the previous 50 years will have likely, not guaranteed, but likely built up a sizeable cash value. If you start the policy at age 80, the COI is so high that it will probably never build a significant cash value. ULs maintain minimal cash value compared to a whole life, but that doesn't mean some companies generate larger cash values than others over time. EX: Sun Life will almost always have close to $0 cash value. John Hancock will fare much better, even though the premiums may be roughly the same.
Posted: Mon Apr 20, 2009 02:48 pm Post Subject:
With the 80 year old, you are having him pay the smallest possible premium that will GUARANTEE that the policy stays in force.
If you do the same thing with the 30 year, it will also never build cash value.
In neither case is the target premium being paid. The policies are really being structured as liftetime term products. That is why there is no cash build-up. It has absolutely nothing to do with the insured's age.
Run an illustration for a 30 year old at the guaranteed premium level and you'll see that the cash surrender value will ultimately be $0 and will never be much more than this.
By the way, I'm not trying to say that there is a problem with the 80 year old not having cash value. This is the same type of policy that I would use for an 80 year old.
Let's make this simple:
FACT: Universal Life policies purchased at the minimum guaranteed premium level (Guaranteed Universal Life) won't build much/any cash surrender value regardless of the age.
FACT: 80 year olds can purchase life insurance policies that will have substantial cash surrender values.
Therefore, if an 80 year old is purchasing a guaranteed universal life policy, it won't build much/any cash surrender value simply because it is a GUL policy and not because he's 80.
Posted: Mon Apr 20, 2009 03:10 pm Post Subject:
Insurance expert...
If what you are saying is true, then how do you account for the fact that the 30 year would be paying much less in premium at age 80 than the 80 year old who waited to take it out at 80?
At some point, the 30 year old's premium will not be enough to cover the actual cost of the insurance. Where do you think the extra money comes from? Do you think the insurance company is just going to be nice and say, don't worry about it, we'll take the money out of our pocket and just take the loss? It doesn't work that way.
Look at it another way. ALL life inusrance has a basis of yearly renewable term to it. The cost of the actual coverage goes up every year. At some point, any policy with any kind of a side account will have to be dipped into to cover the actual rise in cost of the insurance when the breakover point is reached. That's why you see illustrations showing the cash surrender value going down and eventually to $0, because the cost of insurance has risen. You just can't get around that.
Posted: Mon Apr 20, 2009 03:33 pm Post Subject:
If what you are saying is true
There is no "if" to this. Take a look at any UL policy illustration done at the lowest premium level that is guaranteed. The cash surrender value will be minimal to none at all ages.
then how do you account for the fact that the 30 year would be paying much less in premium at age 80 than the 80 year old who waited to take it out at 80?
You need to understand that the guarantees really just make these policies the equivalent of lifetime level term policies. If there was a level term policy that lasted until death, would a 30 year old pay less than an 80 year old? Of course, they would. The reason is 50 extra years of premium payments.
ALL life inusrance has a basis of yearly renewable term to it. The cost of the actual coverage goes up every year.
This is true for universal life. It's not true for whole life.
At some point, any policy with any kind of a side account will have to be dipped into to cover the actual rise in cost of the insurance when the breakover point is reached.
There is only a side account with UL policies. Term policies and WL policies don't have a side account.
That's why you see illustrations showing the cash surrender value going down and eventually to $0, because the cost of insurance has risen. You just can't get around that.
Yes, and when that happens, the insured is going to have pay more and more money every year to keep the policy alive because universal life is nothing more than annually renewable term insurance and a side fund. The exception to this is the fact that many of the policies have a secondary guarantee. This guarantee basically says, "pay a minimum premium every year and we promise to keep the policy in force at the same premium regardless of the cash value." That is what we are talking about. The policies with the lowest guaranteed premiums build almost no cash value. Thus, they are the equivalent to lifetime level term policies.
Posted: Mon Apr 20, 2009 03:41 pm Post Subject:
I don't know what would be considered "almost no cash value" to you, but we always choose the least expensive carrier for the client on our Compulife software when they are looking at a no-lapse UL, and many of them still build a solid cash value on the current side. The guaranteed side with minimum interest and max COI runs out of cash value much more quickly of course, but those are not the current assumptions. Even the guaranteed side with some of the carriers will build a cash value until age ~75 or so for someone in their 30s/40s/50s.
Add your comment