Re: Just Try to Understand Universal Life...Go to Top
Originally Posted by dgoldenz
If you have a $250k death benefit on a UL policy, the beneficiary gets $250k. If you have a $250k death benefit on a whole life policy, the beneficiary gets $250k. If you have $100,000 cash value in a $250k whole life policy when you die, the beneficiary gets $250k. If you have $0 cash value in a no-lapse UL when you die, the beneficiary still gets $250k. If you took the difference in premium between the no-lapse UL and whole life and invested it, then died, the beneficiary would have $250k and whatever is left of the investment on top of that. Which would the beneficiary rather have?
I'm not trying to discredit you so please don't take it the wrong way but have you ever sold a participating WL before?
Re: Just Try to Understand Universal Life...Go to Top
Originally Posted by Franz Kafka
I'm not trying to discredit you so please don't take it the wrong way but have you ever sold a participating WL before?
I know exactly how par WL works. Almost every single client I talk to is most concerned about getting the most death benefit for their dollar guaranteed for the longest period of time they can afford. Dividends are also not guaranteed. I like to work on guarantees, not the "trust me" factor.
What happens when you sell a par WL with $100k death benefit plus a term policy for $900k guaranteed for 20 or 30 years....and then the client has a heart attack but can't afford the cost of conversion to another WL policy 19 or 29 years down the line? Their out of pocket cost on the par WL may go down, but that doesn't matter if they can't afford to convert the rest of what they have and still need. If they've been getting PUA instead of putting dividends toward the premiums, they have a higher death benefit, but probably still lower than what they could have gotten on a no-lapse UL earlier, all while paying a much higher premium. It would take a while for PUA's to increase by 250-300% and match the original no-lapse UL death benefit.
It all comes down to what the client wants and can afford, but when presented both options, most clients want the no-lapse UL with higher death benefit. If they really want and are still stuck on the WL, I'll sell it to them.
Re: Just Try to Understand Universal Life...Go to Top
Originally Posted by dgoldenz
If they've been getting PUA instead of putting dividends toward the premiums, they have a higher death benefit, but probably still lower than what they could have gotten on a no-lapse UL earlier, all while paying a much higher premium. It would take a while for PUA's to increase by 250-300% and match the original no-lapse UL death benefit.
With due respect, this is why I still think you've never sold a par WL. How about a non-par WL (since we're only talking guarantees)? With expected mortality at 90, a non par WL paid up at 65 will blow a NLG UL away in total outlay and it still comes with all the non forfeiture options. For a 40 year old NL UL over against WL doesn't make much sense.
"It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change." Charles Darwin
Re: Just Try to Understand Universal Life...Go to Top
Originally Posted by Death Cab For Tootie
Franz, which non-par WL policy are you looking at in your comparison?
I'm looking at JH NL UL vs JH Non Par WL paid up @65 for 40 year old male standard NT with expected mortality at 90. To be fair, NL UL would come out ahead if the insured dies before 75 but not after.
I'm really not trying to be a smart ass but only trying to point out the fact that the cheaper initial premium always costs more in the long run. Term is cheaper than NLGUL which is cheaper than Non Par WL which is cheaper than Par WL but when you compare total outlays at full lifetime Par WL comes out cheaper than Non Par WL which comes out cheaper than NLGUL which comes out cheaper than Term renewed until mortality. The more you pay upfront, the less you end up paying in totality. (Thought this was pretty common sense? Maybe not)
** For comparison to a par WL, I know it's unfair because we're talking non-guaranteed dividends but looking at MM WL at 100 basis below current projection the policy premium can be offset around year 18~19 and it will still project around 400K DB at mortality at 90. That's a huge difference in overall cost.
Last edited by Franz Kafka : 11-04-2009 at 10:51 PM.
Re: Just Try to Understand Universal Life...Go to Top
Originally Posted by Franz Kafka
I'm looking at JH NL UL vs JH Non Par WL paid up @65 for 40 year old male standard NT with expected mortality at 90. To be fair, NL UL would come out ahead if the insured dies before 75 but not after.
I'm really not trying to be a smart ass but only trying to point out the fact that the cheapest initial premium always costs more in the long run. Term is cheaper than NLGUL which is cheaper than Non Par WL which is cheaper than Par WL but when you compare total outlays at full lifetime Par WL comes out cheaper than Non Par WL which comes out cheaper than NLGUL which comes out cheaper Term renewed until mortality. The more you pay upfront, the less you end up paying in totality. (Thought this was pretty common sense? Maybe not)
It is common sense, but why would you want to pay more up front to save a little bit later? If you died 10 years in, you just spent all that extra money for no reason - you could have bought a policy with a higher death benefit for the same premium. Can you post some actual numbers on your comparison? Not to get too in-depth, but I would bet that if you considered total outlay at its present value, the no-lapse UL would be cheaper. The difference is even bigger when you have someone who qualifies for preferred plus rates, which many 40-year-olds do.
See my comparision in this thread from a while back.
Going by your comparison numbers, the $438k death benefit on the no-lapse UL is a pretty low estimate. A 35 year old male in standard health could get a $600,000 death benefit on a no-lapse UL with Aviva for $2967 per year (approximately the $250/month mentioned). That's a smidge more than $438k, and a big smidge more than $200k death benefit you're starting with. I am guessing the insured would not opt for a 40-year term policy since it's nearly the same premium as the UL, so let's say they bought a 30-year term policy for the $400k difference. That's another $60/month with SBLI, the cheapest 30-year term policy, bringing your total to $310/month for an initial $600k death benefit, and $345k death benefit in year 30 when the term expires (compared to the $600k still in force on the UL at the same premium). At $310/month, the 35 y.o. male could buy a no-lapse UL with a $750k death benefit. That's quite a bit more than the $431k death benefit at age 75 you're projecting on the par WL. At what point on that projection would the insured actually have a $750k death benefit with those projections? Age 95?
Have any numbers for a preferred plus 35 year old male?
Re: Just Try to Understand Universal Life...Go to Top
Originally Posted by dgoldenz
It is common sense, but why would you want to pay more up front to save a little bit later? If you died 10 years in, you just spent all that extra money for no reason - you could have bought a policy with a higher death benefit for the same premium. Can you post some actual numbers on your comparison? Not to get too in-depth, but I would bet that if you considered total outlay at its present value, the no-lapse UL would be cheaper. The difference is even bigger when you have someone who qualifies for preferred plus rates, which many 40-year-olds do.
OK JH NLGUL total outlay at mortality at 90 = $110,716
JH Non Par WL paid up at 65 total outlay at mortality at 90 = $79,675.
Again NLGUL would still be cheaper before 75.
For superman preferred, you're right, NLGUL would still be cheaper up to age 87.
To be even more fair, if I run JH Non Par WL at full pay, NLGUL's total lifetime outlay comes out about 12% cheaper.
But even at 12% premium I think the non forfeiture option justifies the extra cost.
Again if I don't play fair and use par WL (which is what I sell for permanent 95% of the time), the difference in total outlay is too huge to mention.
Re: Just Try to Understand Universal Life...Go to Top
Originally Posted by Franz Kafka
OK JH NLGUL total outlay at mortality at 90 = $110,716
JH Non Par WL paid up at 65 total outlay at mortality at 90 = $79,675.
Again NLGUL would still be cheaper before 75.
For superman preferred, you're right, NLGUL would still be cheaper up to age 87.
To be even more fair, if I run JH Non Par WL at full pay, NLGUL's total lifetime outlay comes out about 12% cheaper.
But even at 12% premium I think the non forfeiture option justifies the extra cost.
Again if I don't play fair and use par WL (which is what I sell for permanent 95% of the time), the difference in total outlay is too huge to mention.
What death benefit and age are you using for those numbers? I may have missed it. What is the premium in year one for the no-lapse UL and what is the premium in year one for the non-par WL paid up at 65? What if they live past age 90?
Re: Just Try to Understand Universal Life...Go to Top
Another factor to consider is "value".
If the Face amount is the same. The difference is the premium. What added value could that buy? Adding waiver to the NL UL on a 40 year old breadwinner seems like a good idea. And/or covering Mom to offset lost income or child care duties. Or maybe a side fund. Or short pay the policy.
If a 40 year old has kids at home they are most likely only going to be dependents for another 10 to 20 years. Seems like they would need the max amount of coverage during that time.
A lot of ways to do what we do. Does not look like anyone here is talking about doing anything wrong, just different.
Re: Just Try to Understand Universal Life...Go to Top
Originally Posted by dgoldenz
What death benefit and age are you using for those numbers? I may have missed it. What is the premium in year one for the no-lapse UL and what is the premium in year one for the non-par WL paid up at 65? What if they live past age 90?
I'm not sure of the initial DB numbers, but of course the out-of-pocket outlay in year one is higher with the WL contract than the GUL. If we were comparing 1st year premium, we'd only sell term. At the end of the day, the beneficiary who gets a death benefit isn't going to ask "What kind of policy was this from? What was the cumulative premium?".
Ultimately, it is up to us to show what a client's options are, and let them decide. I get paid no matter what. What I will say is that my clients see what I own (WL/term combo totalling my economic life value in coverage), and buy a WL/term combo, and buy a lot more coverage than they would have through another agent. Dave, I'm guessing you own a lot of UL on yourself. Thus, your clients will buy more UL from you. Nothing wrong with this, just pointing out an obvious truth: Our clients reflect our beliefs and vice-versa. I believe I am better off with the non-forfeiture options WL provides and am willing to have a higher out of pocket outlay for the privledge. It simply comes down to what is important to people. If there is enough perceived value, people will buy.
Re: Just Try to Understand Universal Life...Go to Top
Originally Posted by Death Cab For Tootie
I'm not sure of the initial DB numbers, but of course the out-of-pocket outlay in year one is higher with the WL contract than the GUL. If we were comparing 1st year premium, we'd only sell term. At the end of the day, the beneficiary who gets a death benefit isn't going to ask "What kind of policy was this from? What was the cumulative premium?".
Ultimately, it is up to us to show what a client's options are, and let them decide. I get paid no matter what. What I will say is that my clients see what I own (WL/term combo totalling my economic life value in coverage), and buy a WL/term combo, and buy a lot more coverage than they would have through another agent. Dave, I'm guessing you own a lot of UL on yourself. Thus, your clients will buy more UL from you. Nothing wrong with this, just pointing out an obvious truth: Our clients reflect our beliefs and vice-versa. I believe I am better off with the non-forfeiture options WL provides and am willing to have a higher out of pocket outlay for the privledge. It simply comes down to what is important to people. If there is enough perceived value, people will buy.
Re: Just Try to Understand Universal Life...Go to Top
Originally Posted by dgoldenz
What death benefit and age are you using for those numbers? I may have missed it. What is the premium in year one for the no-lapse UL and what is the premium in year one for the non-par WL paid up at 65? What if they live past age 90?
I'm using 40 male Standard NT for 250K DB.
NLGUL Initial Premium = $2,214
Non Par WL 65 = $3,187
NLGUL total outlay @118 = $172,716
Non Par WL 65 = $79,675
Re: Just Try to Understand Universal Life...Go to Top
A $1,000.00 difference in FYP?
My clients tend not to be the "money is no object" people. You guys fish in deeper ponds than I do. They could cover a lot of other needs with a grand. IMHO
Originally Posted by Franz Kafka
I'm using 40 male Standard NT for 250K DB.
NLGUL Initial Premium = $2,214
Non Par WL 65 = $3,187
NLGUL total outlay @118 = $172,716
Non Par WL 65 = $79,675
40 year old male, standard, $250k death benefit, no-lapse UL paid up at age 65 is $1904 per year with Aviva. The same person could get a $400k death benefit paid up at age 65 on the no-lapse UL for $3,046 per year, still less than the $250k non-par WL.
40 year old male, preferred plus, $250k death benefit, no-lapse UL paid up at age 65 is $1,560 per year with Aviva. The same person could get a $450k death benefit for $2808 per year, only a $50 difference from the non-par WL with a $250k death benefit.
Re: Just Try to Understand Universal Life...Go to Top
Originally Posted by Franz Kafka
I'm looking at Aviva GUL for 40 male standard NT for 250K paid up at 65 and it's showing premium of $3,347. Are we looking at the same policy?
Where'd you get that from? From Compulife:
Aviva - Advantage Builder with NLG pay to 65 - $1904.00 per year
Aviva - Guarantee UL Solution with NLG pay to 65 - $2012.50 per year
West Coast Life - Lifetime Platinum III pay to 65 - $2339.77 per year
United of Omaha - GUL Complete pay to 65 - $2462.60 per year
You could even do a 10-pay with the Aviva product for $3593 per year, giving a total lifetime outlay of $35,930, a far cry from an outlay of $79,675 by age 65 for the same death benefit on the non-par WL.
Re: Just Try to Understand Universal Life...Go to Top
Originally Posted by dgoldenz
Where'd you get that from? From Compulife:
Aviva - Advantage Builder with NLG pay to 65 - $1904.00 per year
Aviva - Guarantee UL Solution with NLG pay to 65 - $2012.50 per year
West Coast Life - Lifetime Platinum III pay to 65 - $2339.77 per year
United of Omaha - GUL Complete pay to 65 - $2462.60 per year
You could even do a 10-pay with the Aviva product for $3593 per year, giving a total lifetime outlay of $35,930, a far cry from an outlay of $79,675 by age 65 for the same death benefit on the non-par WL.
Got it. Didn't run it at no lapse premium. Yes, I'm looking at $2012. If it has to be NL UL I would definitely go with limit pay. 10 Pay looks real good, too. $3,347 was for guaranteed CSV up to age 75. Apparently actuaries want you to buy the no CSV stuff (wonder why).
Re: Just Try to Understand Universal Life...
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