Living Benefits Rider Use...... a Little Over 4%...

[scagnt83]

So I was talking to my LFG VA wholesaler and he mentioned an interesting statistic that an LFG actuary told a group of wholesalers in a meeting one day;
Only about 4% of income riders are ever actually used....

To say that another way; 96% of rider owners had an unnecessary 1% yearly loss....

VAs are basically just sold on the riders these days.... but how many are actually using these riders?
If you arent there 20 years from now to remind them, how many will even remember thy have an income rider?
Yes, the company will send reminders, but how many clients actually read what the company sends them??? (we all know the answer to the last one!!)


Another reason I still have trouble getting totally on the Rollup/Income Rider train; is that the rollup is great, but the income riders dont usually account for inflation, and its almost impossible to get a step-up during the income phase (LFG excluded).

Honestly, wouldnt a client be better off saving the 1% and moving their funds to a Lifetime SPIA?

I am convinced of this more and more

 

[WPM]

I've been using GLWB's for folks that are close to retirement and considering SPIA's. The payouts are competitive and it provides for some flexitivity.

Not sure if it makes sense to pay for these riders over a long deferral period though.

 

[bluemarlin08]

I am in total agreement with scagent. IMO, the income riders are not competitive with SPIA, however those phantom account roll ups crediting 8% guaranteed sure excite clients, but in reality seem to be smoke and mirrors.

 

[scagnt83]

The actuary that stated that actually laughed when the rider was mentioned.... apparently they are a bit of a joke in the actuarial world.... basically just guaranteed extra profits for the carrier...


I know that we are in a low rate environment right now, but who knows what it will be in 5 or 6 years?
A changing of guard at the Fed & Treasury after 2012 could change the interest rate landscape a good bit...


And again, what about inflation? Just because the payout is more now doesnt mean it will be in 30 years once your locked into a fixed payout.... throw the ability to reallocate at will to fixed accounts when you turn the income on, that means that the chances of a step-up in the income phase is not very likely...

 

[WPM]

The actuary that stated that actually laughed when the rider was mentioned.... apparently they are a bit of a joke in the actuarial world.... basically just guaranteed extra profits for the carrier...


I know that we are in a low rate environment right now, but who knows what it will be in 5 or 6 years?
A changing of guard at the Fed & Treasury after 2012 could change the interest rate landscape a good bit...


And again, what about inflation? Just because the payout is more now doesnt mean it will be in 30 years once your locked into a fixed payout.... throw the ability to reallocate at will to fixed accounts when you turn the income on, that means that the chances of a step-up in the income phase is not very likely...

I agree that most won't benefit from the GLWB unless they take max lifetime withdrawals and they win the longevity lottery. However, in my mind the rider is basically insurance on the asset. Just because the buyer doesn't use it doesn't mean that it is a bad deal. For example a homeowners policy is not a waste of money just because your house doesn't burn down.

 

[DHK]

Many broker dealers won't allow you to do a 401(k) rollover or IRA with a VA without including a living benefit rider.

Without the living benefit rider, it would just be an expensive mutual fund with the option of guaranteed annuitization.

 

[lbritt]

use American Equity products with a 5% rollup at no cost + 3% annual increase in payments.

Helps curb against inflation as well as not decrease the IAV.

The 7% rollup option is only 60 bps. That's what I've been using.

 

[Franz Kafka]

Many broker dealers won't allow you to do a 401(k) rollover or IRA with a VA without including a living benefit rider.

Without the living benefit rider, it would just be an expensive mutual fund with the option of guaranteed annuitization.

Absolutely right IMO. Having sold VAs with and without riders in the past, I would now never sell a VA without a guaranteed rider. I would just sell a mutual fund instead if they didn't want a guarantee.

Income riders on fixed products are a completely different story.

 

[WPM]

Just read this LIS...

Investment airbags: A client conversation - Sales and Marketing Strategies - Life Insurance Selling

 

[pcwest]

I think a lot of "weak agents" use the roll up %'s to get the business either VA or Indexed. These guys do not know what they are selling and hurt those of us who know the ins and outs of these riders.

Reminds me of a few years back when "bonuses" were the easy sell.