Over 150.000 insurance professionals and consumers come to the Insurance Forum every month. Click here to register for FREE


Go Back   Insurance Forums > Insurance Agents and Brokers Forum > Indexed Universal Life Forum

Reply to IUL Illustration Interest Rates     
Old 01-18-2012, 06:00 PM   #1
Super Genius
aus0417 on IUL Illustration Interest Rates
 
Join Date: Jul 2009
Posts:52
State: aus0417 is an Insurance Agent from Alabama
IUL Illustration Interest Rates IUL Illustration Interest Rates
I ran an illustration today for a 25 yo female with Lincoln's IUL. The primary goal here is CV accumulation. The projected interest rate is 8.45% based on the current cap of 13% and floor of 1% and how it would have performed (on average) in past market conditions. Then I compared this to a Guardian WL illustration using PUAs.

I have to admit, judging by the illustration, the IUL is pretty sexy; however, I understand the difference between averaging 8.45% interest over 20 to 30 years and earning 8.45% interest every single year (which is what it seems the illustration shows). I also know the latter scenario is not very likely.

So, how do you show a more realistic picture of policy performance? Are the projections on a participation WL more realistic? Is this why some of you guys prefer WL to IUL?
------------------------------------
  Reply With Quote to IUL Illustration Interest Rates

Old 01-18-2012, 06:22 PM   #2
Super Genius
 
Join Date: Dec 2011
Posts:72
State: dsimo11 is an Insurance Agent from Utah
IUL Illustration Interest Rates Re: IUL Illustration Interest Rates
Originally Posted by aus0417 View Post
I ran an illustration today for a 25 yo female with Lincoln's IUL. The primary goal here is CV accumulation. The projected interest rate is 8.45% based on the current cap of 13% and floor of 1% and how it would have performed (on average) in past market conditions. Then I compared this to a Guardian WL illustration using PUAs.

I have to admit, judging by the illustration, the IUL is pretty sexy; however, I understand the difference between averaging 8.45% interest over 20 to 30 years and earning 8.45% interest every single year (which is what it seems the illustration shows). I also know the latter scenario is not very likely.

So, how do you show a more realistic picture of policy performance? Are the projections on a participation WL more realistic? Is this why some of you guys prefer WL to IUL?
In my opinion, the way to explain it is this:
A whole life shows a guaranted number. Traditionally, dividends have been even higher than what is shown, but its a very safe product. IUL's have way more upside, but as well have more of a downside. The only thing you can do is run the assumed rate at a lower percentage in my opionion. Put it closer to 6 and that will help. Its a crapshoot wither way. Is the client looking to borrow the CV and get some no wash loans? Is the client looking for a tax free income later in life?
What is the client looking to do. One thing for sure, the assumed rate most likely wont hit, especially right now where we are seeing such low interest rates.
------------------------------------
  Reply With Quote to IUL Illustration Interest Rates
Old 01-18-2012, 07:31 PM   #3
Guru
VolAgent on IUL Illustration Interest Rates
 
Join Date: May 2009
Posts:12,991
State: VolAgent is an Insurance Agent from Tennessee
VolAgent is a member of 5000 posts Super VIP club
IUL Illustration Interest Rates Re: IUL Illustration Interest Rates
Use a more realistic rate. Try 6 or 7 and see how it looks then. 8.45% is way too high. LFG has a piece, you have like a 99% chance or so of averaging 7%. It goes down substantially when you get into the 8s.

------------------------------------
You can pay the premium or you can own the loss.
  Reply With Quote to IUL Illustration Interest Rates
Old 01-18-2012, 08:14 PM   #4
Expert
 
Join Date: Dec 2011
Posts:33
State: AZInsurance1 is an Insurance Agent from Arizona
IUL Illustration Interest Rates Re: IUL Illustration Interest Rates
You should check out LSW's IUL. A really good product.
------------------------------------
  Reply With Quote to IUL Illustration Interest Rates
Old 01-18-2012, 09:51 PM   #5
Guru
 
Join Date: Oct 2009
Posts:6,398
State: scagnt83 is an Insurance Agent from South Carolina
scagnt83 is a member of 5000 posts Super VIP club
IUL Illustration Interest Rates Re: IUL Illustration Interest Rates
Due to NAIC Indexed Product Suitability Recommendations being passed by states; LFG and most other carriers set their Default Crediting Rate at the 20 year historical value.


LFGs current caps have a rolling 20 year value of 5.5% over 100% of the time.


Personally I show 6% to 7.5% depending on the time horizon.
------------------------------------
  Reply With Quote to IUL Illustration Interest Rates
Old 01-18-2012, 10:03 PM   #6
Guru
BNTRS on IUL Illustration Interest Rates
 
Join Date: Nov 2009
Posts:2,658
State: BNTRS is an Insurance Agent from Vermont
BNTRS is a member of 1000 posts VIP club
IUL Illustration Interest Rates Re: IUL Illustration Interest Rates
I wouldn't sell the higher IUL solely for the idea that it has a higher projected rate, in fact I'd take that discussion completely off the table.

I'd talk IUL based on a potential to earn a higher rate of return. If the market swings up, IUL will be quicker to react meaning client will see a more immediately benefit. This works both ways though. If the market crashes, IUL is generally quicker to realize a drop in crediting rate than WL is a drop in dividend rate, emphasis on generally.

I'll join the "drop the assumed rate" crowd, as 8.45% is definitely setting up the over promise under deliver scenario.

------------------------------------
Insurance Guru extraordinaire!

The Insurance Pro Blog

The Salus Agency
  Reply With Quote to IUL Illustration Interest Rates
Old 01-19-2012, 07:03 AM   #7
Guru
rousemark on IUL Illustration Interest Rates
 
Join Date: Dec 2010
Posts:12,877
State: rousemark is an Insurance Agent from Tennessee
rousemark is a member of 5000 posts Super VIP club
IUL Illustration Interest Rates Re: IUL Illustration Interest Rates
Does your proposal not show a "mid-range"? The IUL illustrations I run all show current and guaranteed assumptions based on the allocation chosen but they also show a mid-range projection based on the average of the guaranteed and current interest rates and COI.
------------------------------------
  Reply With Quote to IUL Illustration Interest Rates
Old 01-19-2012, 09:05 AM   #8
Super Genius
aus0417 on IUL Illustration Interest Rates
 
Join Date: Jul 2009
Posts:52
State: aus0417 is an Insurance Agent from Alabama
IUL Illustration Interest Rates Re: IUL Illustration Interest Rates aus0417 is the thread starter for: IUL Illustration Interest Rates

Originally Posted by dsimo11 View Post
In my opinion, the way to explain it is this:
A whole life shows a guaranted number. Traditionally, dividends have been even higher than what is shown, but its a very safe product. IUL's have way more upside, but as well have more of a downside. The only thing you can do is run the assumed rate at a lower percentage in my opionion. Put it closer to 6 and that will help. Its a crapshoot wither way. Is the client looking to borrow the CV and get some no wash loans? Is the client looking for a tax free income later in life?
What is the client looking to do. One thing for sure, the assumed rate most likely wont hit, especially right now where we are seeing such low interest rates.
Both, potentially. She is looking for a safe way to save money, to use for any potential unexpected expenses and to be able to access some of the cash as tax-free income during retirement.
- - - - - - - - - - - - - - - - - -
Originally Posted by VolAgent View Post
Use a more realistic rate. Try 6 or 7 and see how it looks then. 8.45% is way too high. LFG has a piece, you have like a 99% chance or so of averaging 7%. It goes down substantially when you get into the 8s.
That is interesting to know, do you know where I can get my hands on it?
- - - - - - - - - - - - - - - - - -
Originally Posted by BNTRS View Post
I wouldn't sell the higher IUL solely for the idea that it has a higher projected rate, in fact I'd take that discussion completely off the table.

I'd talk IUL based on a potential to earn a higher rate of return. If the market swings up, IUL will be quicker to react meaning client will see a more immediately benefit. This works both ways though. If the market crashes, IUL is generally quicker to realize a drop in crediting rate than WL is a drop in dividend rate, emphasis on generally.

I'll join the "drop the assumed rate" crowd, as 8.45% is definitely setting up the over promise under deliver scenario.
These are exactly the scenarios I'm trying to avoid. So realistically speaking, based upon what you guys are saying, if I show her an illustration at 6-7%, I can feel pretty confident that her CV will fall somewhere in between?
------------------------------------

Last edited by aus0417; 01-19-2012 at 09:09 AM. Reason: Posts merged
  Reply With Quote to IUL Illustration Interest Rates
Old 01-19-2012, 09:17 AM   #9
Guru
VolAgent on IUL Illustration Interest Rates
 
Join Date: May 2009
Posts:12,991
State: VolAgent is an Insurance Agent from Tennessee
VolAgent is a member of 5000 posts Super VIP club
IUL Illustration Interest Rates Re: IUL Illustration Interest Rates
Hopefully Scagent83 can post the LFG piece. I could be wrong on the credited percentages and confidence rate of reaching that percentage. But it was a really good piece. Also, it was based strictly on their product and may not apply to other IULs.

------------------------------------
You can pay the premium or you can own the loss.
  Reply With Quote to IUL Illustration Interest Rates
Old 01-19-2012, 09:47 AM   #10
Super Genius
aus0417 on IUL Illustration Interest Rates
 
Join Date: Jul 2009
Posts:52
State: aus0417 is an Insurance Agent from Alabama
IUL Illustration Interest Rates Re: IUL Illustration Interest Rates aus0417 is the thread starter for: IUL Illustration Interest Rates

Ok...so I re-ran the LFG illustration at 7% and here is the breakdown now vs. GuardianWL:

Level DB
@65, CV is equivalent but Guardian DB is 75% higher and the guaranteed CV is 3x more

Max CV Option
@65, LFG CV is 17.6% higher, but Guardian still has a 27.3% higher DB

So I guess the question is...what's more important to the client? Also, if she is likely to access some of the CV during the first 20 years or so, given the loan provisions of the two policies, which one would "theoretically" come out better?
------------------------------------
  Reply With Quote to IUL Illustration Interest Rates
Reply to IUL Illustration Interest Rates 

  Insurance Agent Forum > Insurance Forums > Insurance Agents and Brokers Forum > Indexed Universal Life Forum


Tags
indexed universal life, software




Similar Threads with IUL Illustration Interest Rates
Thread Thread Starter Forum Replies Last Post
Is anyone going to the Convention (National Agents Alliance) (NAA dvd493 Life Insurance Forum 1591 11-17-2016 10:24 AM
How an Equity Indexed Annuity Works? insuranceexec Annuities Forum 91 02-23-2015 06:37 PM
Insurable Interest: Girlfriend Vinny B Life Insurance Forum 51 04-08-2014 05:02 PM
Children's Health Insurance Rates 4th Quarter somarco Health Insurance and Ancillary Benefits 34 09-15-2010 06:39 PM
CA Gerber Life Rates CALTCAgent Senior Insurance Forum 5 07-14-2010 10:16 PM
Guaranteed Issue FE at great rates Newby Senior Insurance Forum 94 09-03-2008 08:38 PM
Candid Camera Mr. Bill Annuities Forum 51 04-16-2008 03:30 PM



All times are GMT -5. The time now is 02:20 PM.

Forum enabled with vBulletin®
Copyright ©2000 - 2017, vBulletin Solutions, Inc.


Join the Forum - It's FREE

Share This Page



Weekly Poll

Where do we go from here? POLL
Nothing - No ACA fixes - status quo
29.82 %
HHS Rulings and band aid bills
17.54 %
Hail Mary repeal and/or replace bill
17.54 %
A bipartisan bill to fix ACA
35.09 %

Voters: 57. This poll is closed