I read and read and read many books over these three products and somehow cannot understand them. The only I see them is that one is fit for lower class, lower to middle class and upper middle class...
Don't hate me, I'm so new to this and want to understand everything. Even my MGA cannot tell me the difference between them, because all he sell in his career is simplified whole life, or whole life, term and a few universal life.
I read and read and read many books over these three products and somehow cannot understand them. The only I see them is that one is fit for lower class, lower to middle class and upper middle class...
Don't hate me, I'm so new to this and want to understand everything. Even my MGA cannot tell me the difference between them, because all he sell in his career is simplified whole life, or whole life, term and a few universal life.
I do not claim I understand all about it. VUL is for people who has security license to sell. It is variable products come with risk similar to mutual funds. As a matter of fact, the variable portion constitutes mutual funds. The interest return of this life insurance depending on the variable funds return.
I have no idea what is UI. If it is UL, that is the fix product of life insurance, similar to whole life.
IUL is the index universal Life. It use market index like S&P500 as benchmark for the interest return of the life insurance.
The VUL has the highest risk or reward and IUL has the second highest risk or reward. The UL has the lowest risk or reward.
Please give us a question that we can answer. Just because you can't "understand" them doesn't mean we know what needs to be explained.
Do you want to know when each might be suitable for a client?
Why would a client want one over another?
How do they work?
Why do they have different required premiums?
How can a policy be credited interest based on an index return when its not possible to invest in the entire index?
Please help us by giving us questions that we can answer.
(BTW, there is no such thing as lower, lower-middle, middle-upper class insurance policies. There are only 2 kinds: the policy the client will buy and pay for, and the ones they won't.)
I read and read and read many books over these three products and somehow cannot understand them. The only I see them is that one is fit for lower class, lower to middle class and upper middle class...
Don't hate me, I'm so new to this and want to understand everything. Even my MGA cannot tell me the difference between them, because all he sell in his career is simplified whole life, or whole life, term and a few universal life.
You should remember something about them from your course. Opening up that course book again helps, too (if you still have it). I know this is not a compliance material but ..
You want to grow that cash value in your policy,
So you take that money and
Buy some mutual funds in a separate account (VUL) or
Buy some fixed interest, take that interest and buy some futures options - you lose, you keep your principal (IUL) or
Buy some fixed current yield interest (UL).
Most ULs don't guarantee the same premium for life.
Most ULs don't guarantee the cash value to keep growing.
If you want to guarantee that your cash value to keep growing, you can buy a WL.
If you want to guarantee that your premium stays the same for life, you can buy a WL or No Lapse Guaranteed UL.
It's all about what kind of risk you want to take with your money. The more risk you take, the more you can make or lose.
I read and read and read many books over these three products and somehow cannot understand them. The only I see them is that one is fit for lower class, lower to middle class and upper middle class...
Don't hate me, I'm so new to this and want to understand everything. Even my MGA cannot tell me the difference between them, because all he sell in his career is simplified whole life, or whole life, term and a few universal life.
Don't worry, we won't hate you. They're complicated products.
Straight vanilla Universal Life can also be called declared-rate universal life, meaning that growth is credited to the policy based on a declared interest rate. Variable UL and Indexed UL are just policies that use a different crediting method.
With an IUL, the interest-crediting rate on premiums changes with the performance of a selected equity index (S&P, NASDAQ, etc.) instead of an interest rate set by the insurer.
VUL policies require a securities license to sell. With a VUL, money (from premiums and CV) is placed into a Separate Account and the policyowner can decide how to divvy it up into various subaccounts. The subaccounts are differentiated by the level of risk and reward they might offer, as well as the type of investment. Some companies have three subaccounts for their VUL products, some have twenty. If it's three, the policyowner usually has the option of bonds, stocks, and money market investments. More than that, you get into subsets of each of these: corporate bonds, high-yield corporate bonds, and government bonds for example.
The policyowner can usually also place money into a Fixed Account (separate from the Separate Account) which has less of an investment-style flavor. Here, the interest rate floor is declared and the principal is guaranteed.
Hey, just to make things more confusing, VUL policies sometimes offer Option A, Option B, and Option C. Option A and B are the same as always, Option C is essentially a DB plus ROP.
I'm rambling. Did you have any specific questions about how it works, or is the basic overview helping?
Even my MGA cannot tell me the difference between them, because all he sell in his career is simplified whole life, or whole life, term and a few universal life.
Find a different MGA if you want to sell UL products and keep your whole life products with your current MGA.
It would help tremendously if you were to ask specific questions about what it is that you don't understand about the UL market. You'll get a few different opinions and then you can decide if it's something you want to do. Between Term, Whole, and UL it is commonly agreed that the UL is the most complicated to understand so you are not alone
Find a different MGA if you want to sell UL products and keep your whole life products with your current MGA.
It would help tremendously if you were to ask specific questions about what it is that you don't understand about the UL market. You'll get a few different opinions and then you can decide if it's something you want to do. Between Term, Whole, and UL it is commonly agreed that the UL is the most complicated to understand so you are not alone
What I'm trying to understand is the difference between the three. I know VUL and IUL are based off UL, but how are they different and what is the typical client for each product.
I have an uncle who is 43 years old, seven years ago an agent (new to insurance) sell him a VUL, and told him that he will never have to make a single premium after the first year. Yet, he comes to me and ask me why he still required to make payments and every month it's higher. I cannot answer him, eventhough he relied on me since I got my insurance license and does insurance. He only make $24K a year, and care little about investments.
If I am the agent, I would offer him a UL or WL, and tell him to put the rest in a MM account, since risk is not his style.
But I dont really want to deal with family, and he has been in teh policy for 7 years I dont think it's a good idea for me to replace it. And let's say it's a better choice for me to replaced him, how would I present my UL products?
But I dont really want to deal with family, and he has been in teh policy for 7 years I dont think it's a good idea for me to replace it. And let's say it's a better choice for me to replaced him, how would I present my UL products?
Forgive me now for being a little harsh, but...
Why are you selling this guy a UL? He has already had one bad experience with a VUL and an agent who either didn't understand the product, or misrepresented it. And based on your posts here, I don't believe you really understand a UL.
What his previous agent told him was correct, if your uncle had massively over-funded the policy. Yes, it would have been a MEC, but it also would never have needed another premium payment if he'd put enough money in and had decent investment choices. Now you want to replace the VUL with a UL. Is it a no-lapse UL or a traditional UL? If it is traditional, are you going to do what the previous agent didn't do, have your uncle over-fund it? Only paying target on a UL/VUL without a guarantee rider/provision is a recipe for disaster.
If you only want to have him pay target, sell him a WL. At least it can't blow up, assuming there are no withdrawals.
There is nothing inheriently wrong with a VUL or traditional UL, you just have to know how to use them and manage the investments in a VUL.
PS. Becareful about giving any advice on a VUL if you are not securities licensed. I know he is your uncle, but its a bad habit that could come back to bite you later on.
First takes Volagent's wise advise about not advising on this VUL. Unless you are licensed
Second,.""..and told him that he will never have to make a single premium after the first year...Yet, he comes to me and ask me why he still required to make payments and every month it's higher. I cannot answer him,...""
Based on this limited information, Sounds like this policy may be in trouble and ~may~ need to be replaced before it implodes. I suggest finding an agent licenced in your state to help you on this case. At a minimum get your uncle's last statement from the company and fax a copy to one of the gurus here for an opinion. Maybe also order an in force illustration. Won't cost him anything. Of course redact the name and policy numbers off first. I know he is your uncle, but have him sign a release to authorize you to look into his policy.
Originally Posted by NoFault
What I'm trying to understand is the difference between the three. I know VUL and IUL are based off UL, but how are they different and what is the typical client for each product.
I have an uncle who is 43 years old, seven years ago an agent (new to insurance) sell him a VUL, and told him that he will never have to make a single premium after the first year. Yet, he comes to me and ask me why he still required to make payments and every month it's higher. I cannot answer him, eventhough he relied on me since I got my insurance license and does insurance. He only make $24K a year, and care little about investments.
If I am the agent, I would offer him a UL or WL, and tell him to put the rest in a MM account, since risk is not his style.
But I dont really want to deal with family, and he has been in teh policy for 7 years I dont think it's a good idea for me to replace it. And let's say it's a better choice for me to replaced him, how would I present my UL products?
"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
Don't worry, we won't hate you. They're complicated products.
Straight vanilla Universal Life can also be called declared-rate universal life, meaning that growth is credited to the policy based on a declared interest rate. Variable UL and Indexed UL are just policies that use a different crediting method.
With an IUL, the interest-crediting rate on premiums changes with the performance of a selected equity index (S&P, NASDAQ, etc.) instead of an interest rate set by the insurer.
VUL policies require a securities license to sell. With a VUL, money (from premiums and CV) is placed into a Separate Account and the policyowner can decide how to divvy it up into various subaccounts. The subaccounts are differentiated by the level of risk and reward they might offer, as well as the type of investment. Some companies have three subaccounts for their VUL products, some have twenty. If it's three, the policyowner usually has the option of bonds, stocks, and money market investments. More than that, you get into subsets of each of these: corporate bonds, high-yield corporate bonds, and government bonds for example.
The policyowner can usually also place money into a Fixed Account (separate from the Separate Account) which has less of an investment-style flavor. Here, the interest rate floor is declared and the principal is guaranteed.
Hey, just to make things more confusing, VUL policies sometimes offer Option A, Option B, and Option C. Option A and B are the same as always, Option C is essentially a DB plus ROP.
I'm rambling. Did you have any specific questions about how it works, or is the basic overview helping?
What does e have the insurance for? What is the risk he is trying to protect against? Making 24K a year, the guy might not want to be wasting money on a VUL or UL, IMO.
Is the policy convertible? Who is the carrier?
What is the face value? Cash Value? Does death benefit pay both?
No way any insurance policy can pay for itself in one year. That first year is basically just to cover the front end costs of the policy, like your commission. VUL are neat products and interesting way to protect your cash value against inflation.
Remember Variable means variable death benefit depending on investment results, usually no less than certain value. Investments are held in separate account and carry LOAD COSTS ( management fees) and are selected by the policy owner. These are for more experienced investment people usually.
Universal means flexible premium payments and results in different face/cash values as well. Universal carries a term portion and a cash value portion that is invested. There are often LOAD costs with UL too, since upon premium receipt the account credits the cash/investment portion and debits the cash to pay for the term portion on a monthly basis. Investments usually tied to inflation adjusted index or other safer investment.
You need to find out what he has the policy for in order to figure out where to go from here. At the same time you need to determine either through, needs analysis or life-value analysis he is covered adequately.
VUL, Ul, IUL
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