LFG TIUL (the Future of GUL Maybe??)

[scagnt83]

So LFG has their new TIUL (Treasury IUL).
Technically I would call it a TGIUL (treasury guaranteed iul)

I am still getting my head totally around this product, but they might be on to something here.

Here are Lincolns words about it:
"If you have clients who want guaranteed protection now and opportunities to benefit if the 10-year Treasury yield rises, consider Lincoln Treasury Indexed UL.1 It's affordable, guaranteed indexed universal life insurance that can get better based on 10-year Treasury performance.

With Lincoln Treasury Indexed UL, your clients get guaranteed death benefit protection and affordable level-pay premiums. They choose the length of their initial guarantee, and if the 10-year Treasury yield exceeds minimum levels, they have an opportunity to extend their guaranteed protection up to a lifetime.2

Lincoln Treasury Indexed UL gives you the competitive advantage of having an innovative solution like no other on the market."



First, you choose the Guarantee period, from 10 years to Lifetime.
Obviously premium is based on the initial guaranteed period.

The policy is guaranteed 4% Crediting currently.
Then, if the 10 year Treasury is over 2% for the policy year, you can earn Credits that can go towards reducing your premium, extending your guaranteed period, or it can stay in the policy (CV), or it can be refunded to you as a return of excess premium. (WL guys, does this remind you of the different dividend options on WL?!)


LFG is pitching this as a possibly cheaper alternative to traditional GUL. Thinking that with low rates the treasury play should work out well for clients.


I like seeing the return of being able to choose your guarantee period.

But Im not sure if this is true innovation or another way to transfer what has traditionally been the Insurance Companies risk, to the client.... and by default us agents...

 

[Justin Bilyj]

I would like to compare different guarantee periods' prices with other ul/wl prices.

How much growth do you see the 10 year treasury having? I don't see it going up ever. The interest on the debt would balloon and sink us instantly, which is why they are keeping rates low. Bernanke has signaled his willingness to expand qe to eternity and inflate the money supply then drive rates up and our debt in turn. Atleast with the former method he can let the politicians and his bank friends dance the jig and loot sovereign wealth funds while the ship sinks...

 

[scagnt83]

I would like to compare different guarantee periods' prices with other ul/wl prices.

How much growth do you see the 10 year treasury having? I don't see it going up ever. The interest on the debt would balloon and sink us instantly, which is why they are keeping rates low. Bernanke has signaled his willingness to expand qe to eternity and inflate the money supply then drive rates up and our debt in turn. Atleast with the former method he can let the politicians and his bank friends dance the jig and loot sovereign wealth funds while the ship sinks...

I havent done many comparisons yet. LFG claims that it is a lower priced alternative. We will see.


This is my personal opinion, and not advice, but I do see rates being increased eventually. Most likely not within the next 5 years, at least not significantly. But in the next 10 to 20 years for sure.
Remember that with a GIUL we are talking a 20-50 year time horizon.

Bernanke will not be there forever. And over the next 5 years there will be many pressures on the Fed to bring up rates (there already are).

Look at historical rates for this country. We have been high, low, and everywhere in between. I dont think we will see 1980s rates again anytime soon; but who knows?

Bottom line is that our country can not keep rates this low forever if we are to keep a stable economy.
Imo, the only real reason we can do so right now is because the rest of the worlds economy is just as messed up as us. And since we are still the world super power, we are seen as the safe haven currency. So investors put up with low rates for the safety of the Dollar.
Eventually, when the world economy smooths out a bit, other countries/investors will not have as much of a need for putting money in a safe haven currency.
So to keep our currency relevant we will be forced to gradually raise Treasury rates.


Bottom line is that if you think the US or World economy is doomed, then you are probably in the wrong line of business since the products you sell rely on the stability of the US Currency to pay their Guarantees.

Back to rates; the major point is that there is nowhere really for them to go but stay the same or go up.

The way I see this product, you know your guarantee if they do stay the same, and if they do go up everything else is gravy.

 

[Justin Bilyj]

I hear you with that but BRIC is coming together and devouring more gold for a new currency. I see the dollar being devalued and becoming a burned out balkanization like former soviet. Brazil Russia Iran and China can be a major variable your not accounting for. All I know is you can't have trading defecits, student loan debt, sky-rocketing entitlements and Nationalization via fed and treasury buy-ups for toxic 300+ trillion derivative loss that is hinged upon the interest rates.
Interest rate increasing = ballooning debt and hyper exposure to derivative losses.

 

[mcleanbr]

Would this be priced like a term policy, maybe a little higher, that is baed on the length of the guarantee?

 

[value]

I think it will take awhile to catch on, but will be come a top seller as agents get their head around it(same time frame as Hancock's protection ul) my feeling is that I will continue to prefer to sell the protection ul as it is more flexible, but the treasury product will sell well to sophisticated clients who understand macroeconomics at play.

 

[scagnt83]

Would this be priced like a term policy, maybe a little higher, that is baed on the length of the guarantee?

Pretty much, with a 30-50 year treasury play thrown in.

It seems like a dial your own age GUL, and the risk beyond the Guarantee period is transferred to the client.

 

[stuy119]

What's the benefit of this over an IUL tied to the S&P? Or are they comparable, just with a different indexing strategy?

 

[unlimitedsigh]

One step above the pork-belly indexed products.

 

[scagnt83]

What's the benefit of this over an IUL tied to the S&P? Or are they comparable, just with a different indexing strategy?

Not comparable to traditional index products. This is a GUL play.

Index gains get you "credits" that extend your guarantee period or reduce your premium.

It is not a product for cash value accumulation.
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One step above the pork-belly indexed products.

Very insightful and educational post there