Should You Sell Indexed UL?

[Justin Bilyj]

I didnt even notice. Larry, stop baby sitting the forums. I dont care if its repeated, never had to review material multiple times to get it?

This forym.is closely becoming a nanny state, between this and red blood american calling out people in posts every week.


Too many old guys with too much time on their hands...

 

[Larry Tew]

I didnt even notice. Larry, stop baby sitting the forums. I dont care if its repeated, never had to review material multiple times to get it?

This forym.is closely becoming a nanny state, between this and red blood american calling out people in posts every week.


Too many old guys with too much time on their hands...

I expressed my opinion, you expressed yours. And you didn't notice replying to identical posts and you call ME old? Anything else?

 

[Justin Bilyj]

Maybe the answers to my questions above hotshot.

 

[Larry Tew]

Maybe the answers to my questions above hotshot.

If the moderators ask me to change what I post, I'll gladly oblige. If you don't like my posts, put me on your "ignore" list. I know you're 30 and know it all, but I've suffered your youth and inexperience all I intend to. To the ignore list you go!

 

[Justin Bilyj]

Anyone else not acting like a baby want to answer the questions?

 

[scagnt83]

I actually enjoyed the post. Question, if the aim is to increase cash value or take income later on, what is a better fit, IUL, or PWL (w/ pua)?
Too me it seems like the IUL is a product that requires more education, more understanding, and perhaps more maintenance, what do you guys think?

Both can work very nicely.

There are two main differences.
1: Risk
2: The availability of GPT on IUL (UL in general)

The WL is less risky than IUL.
With IUL, you run the risk of 0%/1% years when the market is flat or negative.
On the flip side, with a 13% cap, the IUL has the potential for higher gains vs. the WL.


WL uses CVAT, IUL has the option of GPT.
GPT allows for a higher withdrawal % vs. CVAT.

This dos not mean that the IUL will create a higher income.
-It means that based on the same CV, GPT will outperform CVAT for income.

But obviously if the CVAT CV is higher than the GPT CV, then it has the potential to be more.


In short, for accumulation, it depends on which you feel more comfortable with.
For distribution, the IUL has the potential for greater % distributions.



Both products have moving parts that need to be fully understood.
IUL isnt all that much more complicated than WL to understand.

However, I strongly stress yearly reviews for the IUL (any policy honestly). But an overfunded WL needs yearly reviews too.
But its not like being directly in the market where you might need to review randomly after major market moves.

 

[Justin Bilyj]

GPT and CVAC I can guess some of the letters but not all, can you brief me on these two terms.

Thanks for answering my questions.

 

[scagnt83]

Long term viability, what do you think will happen to IUL's when the FED increases interest rates? (not that I think they will be our currency collapses, but not everyone is as conservative as I am in this regard).

An increase in rates would actually boost all insurance products (indexed products especially).

The high caps would be even further protected and possibly increased with a raise in rates (imo).

The cap and min guarantees on Indexed products are directly tied to the rate environment.
And considering that Fed rates are at an all time low, and insurance product rates and caps are at all time lows.... I dont think I need to expand on the correlation...
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GPT and CVAC I can guess some of the letters but not all, can you brief me on these two terms.

Thanks for answering my questions.

GPT- Guide Line Premium Test
CVAT- Cash Value Accumulation Test

These are the tests to determine if the policy qualifies as Life Insurance. And they adjust the policy in different ways to keep it in line.

Im pretty sure BNTRS has done a piece about this on the insurance pro blog (he probably copied it from one of my old posts... ) and Im sure he goes into a lot more detail than I have time to at the moment.
If not, I will have to write a guest article for his site

 

[JMO Fan]

Non-indexed (declared-rate) UL seems likely to produce stronger long-term results than IUL, if the index is the only difference. IUL must divert some of the premium to purchase hedges against the stock index, which cannot be converted to credited interest. If the commissions are the same or higher, that also weakens the IUL product as compared with declared-rate UL.

But some people are attracted to the allure of stock index growth. If that gets them to buy more insurance, and put in more money toward their future, that offsets the potential disadvantage of diverted dollars. Almost nobody has too much insurance, including me.

 

[BNTRS]

CVAT = Cash Value Accumulation Test

GPT = Guideline Premium Test aka Guide Line Premium (Corridor) Test

CVAT is a percentage of cash value to death benefit that cannot be crossed otherwise the policy will fail the TEFRA/DEFRA Test to be classified as a life insurance contract and be reclassified as an investment stripping it of it's tax deferred privilege and making all gain immediately taxable. It'll also make the portion of the death benefit that is not net amount at risk taxable income to the the beneficiary.

GPT is both an amount of premium and a percentage of cash value to death benefit amount. The allowable premium is higher than CVAT, and the percentage of allowable cash is higher (i.e. GPT requires less death benefit per dollar of cash surrender value).

Again, if violated the contract is reclassified as an investment imposing the nasty features mentioned above.

As scagent said, GPT makes for better distributions since it requires lower death benefit (read: inherent lower expenses, in theory).

The one draw back to GPT is the allowable outlay reduces a lot in later years, meaning anyone who starts a policy with GPT and chronically underfunds it with the intention to catch up with that later (like 15+ years down the road) is probably making a big mistake.