Policies Are in Trouble - Need Help.

You have to ask yourself "how long should I live?". If you feel you'll still be around at 85 or 90 or longer then remember that one year term (the insurance portion of all ULs) goes up every year. If you stay with a UL then you will most likely have this same problem again in 20 to 25 years. My advice is to get rid of the ULs and go with a guaranteed whole life plan. But don't drop anything until after a new policy is approved.

OK. I think that may help solve things for one policy but I have 2 UL's that are in the same boat. The agent that contacted me seemed to indicate that if they converted the policy and used my existing cash values to fund new whole life policy then the conversion from UL to WL would be guaranteed but from the sounds of things, perhaps I need to double check that. The other policy is not in very good shape as it only has a cash value of $7400 and when I contacted that agent he had no suggestions other then paying the higher premium. The bad news is that my current agent on the second UL became my agent by default when the agent that wrote the policy retired and has never serviced or supported the policy. I'm also convinced that this agent was totally clueless of the problem as he had to have one of his staff do the analysis of my situation when I presented him with the facts. The good news is that my nephew is an agent for the same company in the same town and I can transfer the policy to him if he has any solutions. I have sent an email to my nephew asking him for advice and he would never screw over his uncle. That being said would the general advice be to cash in that policy and take the cash value if my nephew can't come up with a solution?
 
Not to derail this guy's thread but can you lay out the GUL limitations you are telling him about?

"CON: If you miss a payment, the guarantees are taken away.
This is the BIGGEST con. People change bank accounts or move residences and forget to update their address with the life insurance company. If this happened with whole life and other universal life insurance policies, they would take premiums from your cash value until you get back on track - so you have some flexibility. With guaranteed universal life, if you miss a payment then the "no lapse guarantee" is taken off the policy when you re-instate it. Your premiums are no longer guaranteed when you miss a payment."

I quickly found this since I'm being nagged to hurry up and get off the computer. I have to pick up my gf's uncle from TIA. "Yes, dear....I'm coming..."
 
My health is generally good. I had a case of pericarditis back in 2011 that resulted in me having 7 AFIB events before things settled down but I'm on two drugs for AFIB and have not had an event in 3 year. I'm also have sleep apnea and wear a CPAP at night. Other than the above I think I'm pretty health as I work out on an elliptical for an hour almost every day at my local gym. Unfortunately, the two meds I'm taking for AFIB have caused me to gain an additional 20 pounds so I'm considered to be overweight in most circles. These are the only things, in my opinion would be factors in underwriting a new policy if that was an option I wish to take.

Before you dump those inforce, non contestable policies get quotes for a whole life policy based on your current health. For the same face as your policies, then have inforce illustrations run showing the whole life premium being paid into them. That way you are comparing face and premium. It may turn out you are better served by dumping them. However, there is no way to say that with the Limited information here.

Another idea: if you decide a smaller face works maybe 1035 the money from one policy into the other and have a search done for a premium to carry the policy to the age you choose.

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"CON: If you miss a payment, the guarantees are taken away.
This is the BIGGEST con. People change bank accounts or move residences and forget to update their address with the life insurance company. If this happened with whole life and other universal life insurance policies, they would take premiums from your cash value until you get back on track - so you have some flexibility. With guaranteed universal life, if you miss a payment then the "no lapse guarantee" is taken off the policy when you re-instate it. Your premiums are no longer guaranteed when you miss a payment."

I quickly found this since I'm being nagged to hurry up and get off the computer. I have to pick up my gf's uncle from TIA. "Yes, dear....I'm coming..."

To blanket of a statement. I have a clients that have missed many payments, taken loans, reduced face amounts and still have the guarantees. Two that I can think of off the top of my head have West Coast Life and ONL GULs.
 
I don't think the agent I spoke with locally was trying to suggest that anything was guaranteed. What he was trying to suggest is that although my current policy has a guaranteed 4.0% return on the cash value and is currently paying 4.5%, the company probably will not be able to sustain 4.5% much longer. He mentioned something about my current policy return being tied to the federal interest rate which today is virtually zero. What he was suggesting was what he termed a Variable Universal Life policy where the cash value is invested in one or more mutual funds managed by the company. The sales pitch was this.....

According to the agent, there has never been a 10 year period of time where the 10 year average return from the stock market fell below 8%. He said that you can go back though all of the crashes since the stock market has existed and I would never find any 10 year period when the 10 year average fell below 8%. What he suggested was that their model indicated that if the investment earned at least 7.68% then my cash value would continue to grow and would be able to sustain the increasing insurance premium thru the end of the policy. In the case of my current policy, it has a guaranteed return of 4.0% but this Variable UL has no guarantee, only a gamble that if what the agent said about the 10 year rolling average is true then the policy would work. My concern is this.... If we have another 2008 crash in the early years of the policy before the cash values have had a chance to grow, I think I'd be really screwed as my reserves would become depleted and I may be back in the same boat as I was before with a limited time to recover.

Like everyone else nobody knows when they are going to die. My family history seems to indicate that most of my relatives died in their 70's or 80's but they all smoked and I've never smoked and I'm sure that I take much better care of myself then they did and modern medicine has also improved longevity so baring some accident I might live to be in my late 80's or so. It's all a gamble anyway as the insurance companies are betting I won't die soon and I'm betting I will. I have no idea at this point what the life expectance table are for a 64 year old, no smoker in reasonably good health.
 
To blanket of a statement. I have a clients that have missed many payments, taken loans, reduced face amounts and still have the guarantees. Two that I can think of off the top of my head have West Coast Life and ONL GULs.

I would have to analyze those contracts first. But consider this: Each missed payment, loan, or late payment causes a cascade effect on the interest compounding for future values (and, of course, that interest rate determines how much cash value the policy has which pays for the cost of internal term insurance). Any missed cash that the insurance company doesn't have is cash that cannot be used. A loan may not seem to effect it much now, or even in 10 years, but it could make the difference in the UL imploding at age 80 rather than the projected age of, perhaps, 100. You would need plan software sophisticated enough to create a "what if" scenario to take those variables into account.
 
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Two weeks ago I received a frantic call from my new agent (I moved) and he said that my policy with his firm is in trouble. The policy is currently paying 4.5% on the cash value and they guarantee that they will always pay 4.0% minimum. The problem, as I understand it, is that my $100 quarterly premium is no longer covering the cost of insurance and the policy is eating up the cash value to pay the difference in cost.

What the agent was telling me was that if the company increases their expenses on the policy to the max they are allowed to and also reduce the interest rate paid on the cash value to the 4% minimum, my policy will be out of cash value by age 74 and if that happens my policy will no longer pay the death benefit. His suggestions were to:

A few "if's" in there, huh? Yes, I suppose that's all true... but I wouldn't be in a "panic" over it. I have a similar case that I've outlined below... but as an agent, I wouldn't be making any blind recommendations without meeting with the client first and determining their goals and objectives.

1. Increase my premium from $100 to no less than $250 per quarter.

An appropriate suggestion... if it's affordable for you.

2. Reduce the cost of insurance by reducing the death benefit and continue to pay my $100 quarterly premium.

Again, an appropriate suggestion, if it fits your needs and goals.

3. Converting my current policy into a substantially reduced paid up whole life policy using my existing cash values to buy the policy.

An appropriate suggestion... I guess. He may be saying to do a 1035 (tax-free) transfer to a single premium whole life policy. However, that doesn't mean it meets your needs and goals.

4 Convert the existing policy to a different type of Universal life policy where the existing cash value would be invested in mutual funds managed by the insurance company. There would be no guaranteed minimum amount that this policy would earn but the hope is that the policy would earn an average of 8% return per year over any 10 year period of time.

Aw HELL no!
1) No guaranteed earnings with a Variable Universal Life, unlike your current policy paying 4% (perhaps a minimum of 2%?)

2) Do you know of any mutual funds getting an 8% return AFTER management expenses for 10 years?

3) You'll still have the same problem, but now you have more "if's" and uncertainty in your plan.


Since my other policy was very similar to the one noted above, I checked it out and found that it too was now eating my cash values to pay the premium and this policy will also be dead by age 77.

At this point, I'm almost 64 years old and retired. My wife and I have pensions, IRA's, stock and in another 3 years I'll take Social Security. Before we retired we had everything analyzed and we will never need the cash value in either policy. The thought was that my $60,000 policy would go to my wife and a portion of that benefit would pay off any car loans and my final expense. The other policy would be paid to my daughter to pay the education expenses of my grandchildren. My concern now is that if I don't do something there won't be any death benefit and I'm also concerned that the agent may only be giving me the options that are in his best interest as opposed to my best interest. Does anyone have any suggestions on how to get out of this mess? Are there other alternatives to this problem that don't involve the agents, the companies or the existing policies? Please let me know.

I have a similar case I'm working on right now with a couple in their early 60's. Here's the thing: Current assumptions & expenses are probably more likely... than the guaranteed maximums. But the risk of increased costs and decreased earnings is still there and has to be disclosed.

I met with my clients to find out what their needs and goals are... before making "panicked recommendations" over the phone.

In the case I'm working on, the client wants to increase their coverage without increasing premium on the husband. She also wanted to know when she could stop making payments on her policy. (I chuckled internally, but she was initially wanting "something for nothing".)

Well, they're in an Index Universal Life... and the policy has performed well over the last 8 years. Even then, the cash values aren't important to them at all. They are small policies ($100k each)... so the recommendation I'll be proposing, ASSUMING (I hate that word) that we can get a favorable underwriting decision, is to do a 1035 tax-free transfer to a non-lapse guaranteed universal life and re-direct the same payments to the new policy. I found I could increase the face amount without increasing the premium - assuming a standard underwriting class - down to a rated table 4.

Then, as long as they make their premium payments on time, their coverage will be guaranteed to age 100 on the husband and age 94 of the wife (versus age 73 & 75 highest expenses).

With my case, I don't know what the original intentions were of the IUL policy recommendation. I wouldn't have sold a couple in their mid-50's a target-premium only $100k IUL. But I can help them keep their coverage in place and increase it... since cash values weren't important to them.

My bigger concern is the "panic" call you got from your "new agent". Yes, what he says may be very true... but he may be just trying to get you to want to buy a new policy (based on the suggestion of a VUL) without a true analysis of what you want to accomplish. You've probably told us more here... than you did to your "new agent".

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The sales pitch was this.....

According to the agent, there has never been a 10 year period of time where the 10 year average return from the stock market fell below 8%. He said that you can go back though all of the crashes since the stock market has existed and I would never find any 10 year period when the 10 year average fell below 8%. What he suggested was that their model indicated that if the investment earned at least 7.68% then my cash value would continue to grow and would be able to sustain the increasing insurance premium thru the end of the policy. In the case of my current policy, it has a guaranteed return of 4.0% but this Variable UL has no guarantee, only a gamble that if what the agent said about the 10 year rolling average is true then the policy would work. My concern is this.... If we have another 2008 crash in the early years of the policy before the cash values have had a chance to grow, I think I'd be really screwed as my reserves would become depleted and I may be back in the same boat as I was before with a limited time to recover.

You're absolutely right about the 'sales pitch'.

He doesn't know about actual returns vs average returns.

Heck, I can guarantee you a 25% average annual return! Watch this:

Year 1: You have $100,000 and it grows by 100% to $200,000.

Year 2: You now have $200,000 and it loses by 50% to $100,000.

Year 3: You have $100,000 and it grows by 100% to $200,000.

Year 4: You now have $200,000 and it loses by 50% to $100,000.

+100% - 50% +100% - 50% = 100% / 4 years = 25%.

Your average annual rate is 25%... but what was your REAL rate of return? 0%.

When the policy shrinks in the market ALONG with increasing costs coming out... you'll be looking at a policy implosion.


My father is in the same boat... except he bought his "Variable Whole Life" policy in the 90's. He funded it well, but stopped making payments on it in early 2000s. It wasn't until 2008 when I did a policy audit when I saw that he hadn't made payments for a few years. I told him to start putting more money into it.

Today he's 63, and not in the best of health. He can't get a better policy at his age for the internal costs, but those costs are also rising. He hopes he can keep this policy in-force until his mid-70's.


In a sense, he's in the same spot you're in... but he's already had the market dips happen in his policy... and it'll still project to lapse by the same amount of time as yours.


Personally, I wouldn't touch a variable policy in your situation. As others have mentioned, a non-lapse guaranteed universal life would probably be your best fit, based on what you've told us so far.
 
To the original poster. You rolled off a laundry list of health issues and none of them will do you well in the search for a new policy. AFIB and Sleep Apnea are big deals with underwriting. I have both as well. Buying new insurance that is underwritten will be very expensive if at all possible.

I'm saying you're unhealthy, but you as healthy as a guy with AFIB, Sleep Apnea can be. Medical doctors and life underwriters look at these things very differently.

I am not sure you can convert a UL into anything else. If you can, take a look at it. You want to make sure it is a guaranteed conversion that doesn't require health underwriting.

If you need the insurance you will have to make what you have work the best for you. You were probably sold minimum premium payments as that's how most ULs were sold back then.

You need to get a current illustration. One thing to keep in mind the new agent wants a sale. If he is applying max expenses to your policy he's an ***. Life insurance contracts are closed contracts. Terms cannot be changed without agreement between both parties later. When an insurance company lists expenses in the contract, it is the maximum they can charge, not what they will charge. They set the maximums so high so that they can't blow the numbers. Remember if they do it wrong the first time, they can't adjust it later, so they set the maximums high enough to cover mistakes in cost projection on their part.

I think with your health, you need to work within those policies you have.

I kid you not AFIB is serious. Just spent 5 days in the hospital. Went to ER with some shivers in my arms and pain in my feet. Mentioned I was AFIB and was in a room in 60 seconds ahead of about 2 dozen other people. It is serious stuff. Good luck, temper what the new agent is saying because he is new and excitable. There should be a way to work things out without you having to re apply for insurance.
 
A few "if's" in there, huh? Yes, I suppose that's all true... but I wouldn't be in a "panic" over it. I have a similar case that I've outlined below... but as an agent, I wouldn't be making any blind recommendations without meeting with the client first and determining their goals and objectives.

OK. Well, here was my goal.

My wife and I have pension, IRA's stock and when I reach 66 I'll take Social Security. Based on our situation I had two financial companies analyze our situation and they ran our financials though 100+ scenarios and there were no red or yellow flags in any scenarios that would indicate that we would ever run out of money in retirement. From what I've been told we are not normal in these kinds of analysis.

That being said, my $60,000 UL was to be paid to my wife to cover my final expenses and to pay off any outstanding auto loans, credit cards, etc. and she could then pocket the rest. My $100,000 policy, the one the agent called me on, was supposed to be paid to my daughter with the intention that she use the money to pay for the college education of my 2 grandsons. I always assumed that I would die before I reached the age maturity of either policy so I was never planning to receive the cash value at age 100. I also always assumed that I would continue to pay premiums all my life.

So that was my goal as far as my current policies go. Like someone said in this thread, you take out a policy and you pay the premium and you forget about the terms and conditions until something happens to bring things to your attention. Unfortunately, I'm not versed in insurance to know what might be the best course of action to take. Although it's not an issue that has to be resolved immediately, it's still an issue that I can no longer ignore either. If there are other insurance or non-insurance ways to reach my goals I would like to know what they are so I can make an intelligent decision on what to do and I'm appreciating all of your help and advice. Hope this helps in better determining what I should do. Thanks again to all.
 
OK. Well, here was my goal.

My wife and I have pension, IRA's stock and when I reach 66 I'll take Social Security. Based on our situation I had two financial companies analyze our situation and they ran our financials though 100+ scenarios and there were no red or yellow flags in any scenarios that would indicate that we would ever run out of money in retirement. From what I've been told we are not normal in these kinds of analysis.

That being said, my $60,000 UL was to be paid to my wife to cover my final expenses and to pay off any outstanding auto loans, credit cards, etc. and she could then pocket the rest. My $100,000 policy, the one the agent called me on, was supposed to be paid to my daughter with the intention that she use the money to pay for the college education of my 2 grandsons. I always assumed that I would die before I reached the age maturity of either policy so I was never planning to receive the cash value at age 100. I also always assumed that I would continue to pay premiums all my life.

So that was my goal as far as my current policies go. Like someone said in this thread, you take out a policy and you pay the premium and you forget about the terms and conditions until something happens to bring things to your attention. Unfortunately, I'm not versed in insurance to know what might be the best course of action to take. Although it's not an issue that has to be resolved immediately, it's still an issue that I can no longer ignore either. If there are other insurance or non-insurance ways to reach my goals I would like to know what they are so I can make an intelligent decision on what to do and I'm appreciating all of your help and advice. Hope this helps in better determining what I should do. Thanks again to all.

You got an annual report every year that outlined what could happen based on current and what will happen based on guaranteed assumptions. Your nephew should have known how to read them as well.

Which companies are these? I am guessing one of the captives or mutuals.

On him helping you depending on his working knowladge he may be able to. However, if he is captive, which is what I am assuming his knowladge on outside options may be limited.

Have him run two illustrations. 1) rolling the Cash Values from the $60k policy into the $100k and doing a search for premiums to carry to age XX. 2) do the same in reverse. Have him explain contestability to you if you decide to replace them.
 
The first thing I would do (as Vol and others mentioned).... get some in-force illustrations run. Then you have a solid footing to analyze from.

My guess is the new agent reviewed your cases (because you're his new client) and one of their sales tactics to generate more business is to create a sense of urgency by presenting a potential problem - sometimes that may not actually be. If he sells a new policy, he makes money.

Now, that assumption may in fact be way off base and maybe in fact your policies do need attention, but I agree with the fact that its not really urgent unless its gonna blow up in a month or two....which it sounds like you aren't anywhere close to that.
 
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