IUL with Lifetime Income?

[maxherr]

And since the NAAR doesn't change (when implemented correctly) or can even be reduced, the "rising cost of insurance" is pretty minor

This may only be accurate as long as the no-lapse guarantee is not lost. If the policyowner fails to pay sufficient premiums (i.e., sum of planned premiums x # months contract has been in effect -- which works to the client's advantage if they max-fund the contract (or at least pay more than the planned premium) in the early years) or, worse, takes some money out of the cash accumulation, which, in most contracts, is clearly articulated as automatic termination of the no-lapse guarantee.

Once the no-lapse guarantee is lost, the annual rising COI sleeping dragon rears its ugly head.

 

[BNTRS]

This may only be accurate as long as the no-lapse guarantee is not lost. If the policyowner fails to pay sufficient premiums (i.e., sum of planned premiums x # months contract has been in effect -- which works to the client's advantage if they max-fund the contract (or at least pay more than the planned premium) in the early years) or, worse, takes some money out of the cash accumulation, which, in most contracts, is clearly articulated as automatic termination of the no-lapse guarantee.

Once the no-lapse guarantee is lost, the annual rising COI sleeping dragon rears its ugly head.

Max, I've known you for quite a while and I trust your judgement as it relates to assisting people who find themselves in truly awful situations due largely to sheer ignorance on the behalf of an insurance agent/broker or company. But I'm afraid you might be in a tad over your head on this one.

No one who reads and understands my last comment would have any comment to make about secondary guarantees. They are completely immaterial to the conversation.

 

[maxherr]

DHK . . . Are you the same DHK that posted the following on ProducersWeb:

I'm appointed with some very strong IUL companies... and I have to tell you that I can't make IULs do what I can make a whole life policy do. I have yet to find the IUL policy that I would be completely comfortable with while earning a nice enough commission for implementing the recommendation.

In the first couple of years, the account values shown look nice... but the client can't access those. They get to access the "surrender values"... which are significantly lower or non-existent for the first few years. But I can structure a WL policy (max funded) to have about 40% or more of guaranteed cash values during the 1st year. I can have the policy "break even" within about 10-12 years in most cases. With IUL... it's a crapshoot. Sometimes it never "breaks even"... and if it ever does on the guaranteed side, it's short-lived.

While I'm not on the "doom and gloom" side of the 'guaranteed' column on an IUL policy (every market has upward and downward volatility)... I'm not on the side of the current charges and 7%+ illustrated annually credited returns every year. I know caps are higher than what we are allowed to illustrate... but when I'm looking at putting "pennies in a bucket to get out a dollar"... to cost of IUL pennies is higher than WL pennies over the long-term.

Just wondering.

 

[DHK]

Guilty! Yep... that's me.

 

[maxherr]

So, in the interest of fairness, exactly where do you stand on IUL and GUL? It seems to me that we appear to have very similar opinions, despite some comments made above.

 

[DHK]

For IUL... if it wasn't for surrender charges for the first 15 or so years... and the increasing costs of insurance disclosed (due to the varying premiums and earnings nature of IUL) in the later years... it would be perfect.

There are IUL policies that will waive surrender charges, but if the policy is cancelled/lapsed, the charge backs extend for the first 3 years. I don't want to take that risk on the client.

I'm big on the "infinite banking" type concepts... which is based on shifting your debt/spending from a bank & credit card company... to a whole life insurance policy maximum funded. You 'could' do the same thing with an IUL... but you have to have the same amount available... and IULs don't do that in the first few years.

Also, I'm in this business to make money. If I'm selling a $10,000 annual premium, the client doesn't know, nor do they care how much of that I earn as a commission. The client is still writing out the same check... so I want to earn as much as I can while providing the solution I know will work. I know that I can design a WL policy with at least a 40% cash value availability... but with IUL, while the account value will be higher, the surrender values are significantly lower. Again, I could waive those surrender charges, but I don't want to take the charge-back risk either.

I'm good with non-lapse GUL. It's not designed to have a cash value, so the premium is lower and guaranteed... as long as premium payments are made on time. It's designed for the older client who needs a bigger death benefit, but can't fund a true cash value policy, like whole life. They may also favor those who have less than perfect health.

 

[agentinsure]

Everyone here keeps touting CV's and surrender charges blah blah blah. While that is all fine and good, after viewing a IUL the other night with all the living benefits, there appears to be a great deal of value extended with the IUL that cant isnt represented in the CV comparison your trying to make with a WL. Unless, you can depict an UL or WL with equal benefits. Have any?

 

[maxherr]

I'm in this business to make money. If I'm selling a $10,000 annual premium, the client doesn't know, nor do they care how much of that I earn as a commission. The client is still writing out the same check... so I want to earn as much as I can while providing the solution I know will work. I know that I can design a WL policy with at least a 40% cash value availability... but with IUL, while the account value will be higher, the surrender values are significantly lower. Again, I could waive those surrender charges, but I don't want to take the charge-back risk either.

So who's best interests are being served? Client or agent. Methinks the lack of concern for the client -- "I don't want to take the charge-back risk" -- is evident.

Be sure to read the Insurance Code on this subject. It's unfortunate that your clients provide you with a maximum paycheck, while only getting a "solution [you] know will work". Ever have one of your "solutions" lapse before it paid a death benefit. How well did that one work out? But at least your commissions were safe.

I'm not in this business "to make money," but I make money because I am in this business. There is a great ethical divide between these two perspectives.

 

[DHK]

We are insurance agents... and one would think that we would understand how to mitigate our own risks within our business, not expose ourselves and our revenue to risks.

Think about this: Annualized commissions are risky to accept should the client stop paying on the policy. Who's on the hook then? Oh yeah... it's the agent that took all that money advanced, instead of "as earned".

So why are new agents taught to go for the "monthly premium" versus a proper presentation of saying that the insurance costs $xxx/year, but you can finance it over 12 months? Of course "financing" it over 12 months also implies that they are going to be PAYING more for it. But if you present the annual premium, you just might get an annual check for it! By simply doing that, you reduce your risks of lapses and charge backs.

Understanding your own business risks is important to staying in business and protecting that business.

If you're not able to stay in business... then all the ethical mantras in the world certainly didn't mean too much, do they?

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I'm not in this business "to make money," but I make money because I am in this business. There is a great ethical divide between these two perspectives.

That's not an ethical divide. That's a philosophical divide.

One can have a motive to serve their clients while making a great income and still be ethical in all their dealings WITHOUT "giving away the store". That's my philosophy.

If one wants to expose their business model and practices to great risks of charge-backs in the name of "helping the client"... is also dangerous to themselves and the reputation of the agents in their community.

Think about this: One agent "waves surrender charges 100% of the time" while one agent doesn't. What does that say about the agent that doesn't?

It's almost like the same argument that one agent "rebates" 50% of their commission, while the other doesn't. Oh, but rebating is illegal, right? Is this a fair comparison? One agent is trying to get an 'edge' on the business while the other "doesn't care"?

It's just the way I think about it.

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So don't you DARE tell me that I don't care about my clients because I choose to mitigate the risks to my business.

I'm in business... not on a "good will" mission to give away my services and open myself to be taken advantage of.

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Everyone here keeps touting CV's and surrender charges blah blah blah. While that is all fine and good, after viewing a IUL the other night with all the living benefits, there appears to be a great deal of value extended with the IUL that cant isnt represented in the CV comparison your trying to make with a WL. Unless, you can depict an UL or WL with equal benefits. Have any?

There are many policies that have similar living benefit riders, especially for states other than California. (We don't get to have Chronic or Critical Illness riders as other states seem to have - but we've still got Terminal illness).

 

[MarkJColbert]

"I'm not in this business "to make money," but I make money because I am in this business."

Over the past 21 years, lawsuits I've personally brought against insurance companies who've operated outside what might be considered the consumer's best interest have settled for more than a Billion dollars. 11 agents have have their licenses to sell insurance permanently revoked, one insurance commissioner was forced to retire to Hawaii, a couple of companies demutualized, and more than 30 million policy holders have been made whole.

I wasn't in this business to make money; I wanted to make a difference. 40% of all life insurance agents are thieves (I'm being conservative) and have no problem spending the money they swindle from the elderly. The Life Insurance Fraud Investigation business is good.

I'm glad to know Max Herr and am very fortunate to have worked with him on numerous cases.