I thought this was rather clever. Got an email from a vendor with a flyer promoting a life product.
The idea is, take some of your remaining assets and buy a life policy to make up for the loss so your heirs can be made whole. Kind of a variation on the pension max pitch.
Idea is to have the insurance in-force at death, so a UL with a Death Benefit Guarantee running at minimum premium (not minimum to endow) would be the least expensive way to accomplish that objective. It would be essentially a Term to age 120. If the UL was Option 2, then it could also be voluntarily overfunded (the right to do that, not the obligation) to increase the total death benefit.
With a WL, the CV would simply be an increasing part of the fixed death benefit, and the most expensive way to acomplish the stated objective.
If you're referring to annual needed premium, I agree - UL would have a lower premium than a WL policy of the same face amount. If you're looking at the actual cost, you are dead wrong. WL, when held over longer periods of time, becomes the least expensive option compared to term and UL.
If you're referring to annual needed premium, I agree - UL would have a lower premium than a WL policy of the same face amount. If you're looking at the actual cost, you are dead wrong. WL, when held over longer periods of time, becomes the least expensive option compared to term and UL.
At death or if surrendered? Guaranteed or with non guaranteed Dividends? Paid the same lengh of time or short paid?
"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
If you're referring to annual needed premium, I agree - UL would have a lower premium than a WL policy of the same face amount. If you're looking at the actual cost, you are dead wrong. WL, when held over longer periods of time, becomes the least expensive option compared to term and UL.
WL policies are never cheaper then ULs. WL are endowment policies so you end up building a cash value you never use (if your objective is a DB). I would like to see how you got to your numbers.
Also last I checked WL carriers are not required and never disclose the cost and fees of a WL policy so how do you know?
I ran a comparison, 45 year old male standard non-tobacco, $1mm DB with waiver. I compared a par WL paid at 65 vs. a GUL from the same company.
Par WL - cumulative premiums - $576,400; guaranteed CSV (not including dividends) - $545,100; net cost - $31,300.
GUL - cumulative premiums - $201,320; guaranteed CSV - $0; net cost $201,320.
At age 65, the WL is paid up. The GUL needs to have $10k put in every year or the guarantees are negated. Explain to me how GUL is less expensive.
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Originally Posted by WinoBlues
At death or if surrendered? Guaranteed or with non guaranteed Dividends? Paid the same lengh of time or short paid?
Lee
Good points. I was referring to when the client is still living. Even without dividends, the cost over 20 years is much less with a WL contract than with a GUL (see above). The sooner the client dies, the less costly the GUL would have been (again, not counting dividends). I decided to not include dividends because they are not guaranteed. When you add them, and put a PUA rider on a par WL, it will absolutely smoke a GUL. Don't misunderstand, I use GUL when appropriate. But talking about cost when one referring to premium is flat wrong and misleading.
Last edited by Death Cab For Tootie : 10-01-2009 at 11:38 AM.
Reason: Posts merged
I ran a comparison, 45 year old male standard non-tobacco, $1mm DB with waiver. I compared a par WL paid at 65 vs. a GUL from the same company.
Par WL - cumulative premiums - $576,400; guaranteed CSV (not including dividends) - $545,100; net cost - $31,300.
GUL - cumulative premiums - $201,320; guaranteed CSV - $0; net cost $201,320.
At age 65, the WL is paid up. The GUL needs to have $10k put in every year or the guarantees are negated. Explain to me how GUL is less expensive.
A 45 y.o. male should be able to get a GUL at that benefit for ~$8,000/year, total outlay by age 65 would be $160,000 approximately. That's $416,000 less in premium over 20 years. How many people can afford to pay $28,800 in premiums per year? That's 3.5 times the cost of the GUL. If they die at age 66, they just paid $400k more for the same death benefit. If they set aside the $20k in premiums each year, they'd have $400k in their pocket (not including any interest) plus $1,000,000 in death benefit. The cash value is meaningless if they die. By the time this client is 100 years old, the GUL will still have only cost them $440,000, and the net present value of that amount is even lower since they're paying premiums to age 100 instead of 65.
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