The only problem with the "zero cost wash loan" is that unless you have chosen the option to get paid the death benefit PLUS the built up cash value, your loan and the interest it accrues (despite being offset on paper by the increasing cash value build-up) will be taken from the death benefit at death. So that loan in the end is against the death benefit not against the cash value.
Be very careful how you structure these policies if you plan to take out money via loan later on.
Hey, Death Cab -- yes, this is an interesting set of posts, and fun too. Hopefully, it's helpful to many agents.
A lot of agents will probably disagree with me, but I believe that the road to the home office is paved with broken promises, fine print, and the bones of their agents. After 40 years, I just don't fully trust the buggers.
Here is what I mean by "flexible" --
First, start with the fact that all Life Insurance is the same thing -- a legal contract that says, "You die...we pay".
Now, what's the difference between Term, Whole Life, and Universal Life?
Most agents will tell you that Term is "like renting...", blah, blah, etc., because they've been trained to give this convoluted answer to help confuse consumers.
The real answer is that there isn't any difference between the three. They simply have different payment plans.
Term is an increasing payment plan. Whole life is a fixed-level payment plan. UL is a flexible payment plan.
That said, my "problem" with WL is not with Dividends, the fact that the payment plan is fixed-level, and so forth. My basic problem is the fact that the insurance company controls the relationship, rather than the customer. My comfort level is always strongest when the customer controls the relationship. UL gives the customer much more control.
Life Insurance isn't proverbial "rocket science". The industry would like people to think so, however, because that makes it easier for them to get customers to overpay. That's why CONCEPTUAL product training isn't done.
UL takes a bit more "maintenance", but to me that's the perfect reason to visit customers at least once a year to review how their policy is doing.
The basic problem I have with Divindends is that they are first of all, a forced overpayment. Then, the customer has to wait 3 - 5 years to get back PART of their money. I prefer the customer get immediate benefit from lower mortality, lower expense, and higher investment income -- and not have to wait years to see some result.
The answer on the cost-efficiency question about getting your money back at 8% compared to 0% is a "no brainer" to me. But, maybe I'm just too simplistic with this stuff.
Hope this helps a bit! Am enjoying this friendly dialogue, by the way -- and you seem to be too.
I am too, ATL. And regarding Term vs. UL vs. WL, I present it in the exact same way, but with a different twist:
Term = increasing premium
UL = level premium
Par WL = decreasing premium
It's all the same stuff, the client decides how to pay. Simple!
Now, I hear what you're saying regarding control: If I, and my clients, have a choice between control and not having control, we pick control every time. My concern is that no matter what financial vehicle we pick, we lose some semblance of control. In WL, we lose some control of how much/when we pay premiums. This is somewhat solved by having dividends and PUA riders, but it's not perfect. In UL, we lose some control because any loans/surrenders/etc, can effect the underlying guarantees. Moreover, in CAUL, the insurance company has the right to raise M&E/Admin Costs/COI, etc to whatever they want.
In the end, however, it comes down to the original question: "Mr. Client - would you like to pay increasing premiums over time, decreasing, or level?"
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Originally Posted by palerider
Ok what is a "par" WL?
Participating Whole Life. The issuer pays a dividend at the end of the year to policy holders, which is a representation of the profitability of the underlying insurance company.
Last edited by Death Cab For Tootie : 10-21-2009 at 09:07 PM.
Reason: Posts merged
I am too, ATL. And regarding Term vs. UL vs. WL, I present it in the exact same way, but with a different twist:
Term = increasing premium
This is Level not increasing unless it is an ART.
UL = level premium
UL can have increasing, level, decreasing, Guaranteed, or variable premiums depending on how you structure the policy.
Par WL = decreasing premium
I would tread very lightly here. A lot of people got in a LOT of trouble selling this in the past (remember "Vanishing Premiums"). WL premiums are by definition Level PERIOD.
It's all the same stuff, the client decides how to pay. Simple!
Now, I hear what you're saying regarding control: If I, and my clients, have a choice between control and not having control, we pick control every time. My concern is that no matter what financial vehicle we pick, we lose some semblance of control. In WL, we lose some control of how much/when we pay premiums.
You lose all control....Premiums are level
This is somewhat solved by having dividends and PUA riders, but it's not perfect. In UL, we lose some control because any loans/surrenders/etc, can effect the underlying guarantees.
This is the same with a WL....any withdraws can affect the Guarantee and the same restrictions apply to loans and surrenders.
Moreover, in CAUL, the insurance company has the right to raise M&E/Admin Costs/COI, etc to whatever they want.
Not true....max COI are stated and M&E and COI are published and relieved to the client. In a WL they are hidden not published.
In the end, however, it comes down to the original question: "Mr. Client - would you like to pay increasing premiums over time, decreasing, or level?"
I am not trying to be argumentative so please dont take it that way. I actually like WL policies and have sold many. They have great cash accumilation and sometimes cant be beat. There are few policies that have an increasing death benefit the way a WL can provide. And Dividends often pay more then interest rates.
Re: Universal Life
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