compare between those two products, which one is better?
Depends what you want. Whole Life builds cash value where you are more self insured each year. UL has many different types of options. Most are considered temporary insurance similar to term. Even the guaranteed UL has a MUCH higher rate of collapsing than whole-life.
BUT if ALL someone wants is death benefit AND they want it longer than term can offer AND they are able to pay every month on time or early (never late) then guaranteed UL can be the perfect solution for them.
The best insurance is the one that matches their needs and everyone has different needs.
------------------------------------
J Scott Burke
Funeral Preplanning
Life Insurance
Medicare Supplements
Long-Term Care Insurance
Annuities
Indiana, Kentucky, Tennessee www.newburyfinancial.com
Depends what you want. Whole Life builds cash value where you are more self insured each year. UL has many different types of options. Most are considered temporary insurance similar to term. Even the guaranteed UL has a MUCH higher rate of collapsing than whole-life.
BUT if ALL someone wants is death benefit AND they want it longer than term can offer AND they are able to pay every month on time or early (never late) then guaranteed UL can be the perfect solution for them.
The best insurance is the one that matches their needs and everyone has different needs.
"BUT if ALL someone wants is death benefit AND they want it longer than term can offer AND they are able to pay every month on time or early (never late)" Very well put!
The reality is that premature death often follows a critical illness where the attention of the policyholder and family is distracted by the illness, the cost of care, and attendance to various matters related to the critical illness and suffering by the victim. The potential for missing a premium payment therefore rises, leading to an increased potential for a lapse of coverage, just when it's most needed.
No pilot in his right mind would take off with just enough fuel to make it to the destination and no SCUBA diver in his right mind would stay down to the point where there's just enough air in the tanks to surface. IMO, any life insurance policy which is in danger of lapse if a premium payment is missed should carry a prominent warning of the danger.
As to "minimum premium no lapse UL", IMO, agents should not be selling that product unless they are thoroughly acquainted with the policy wordings in their entirety AND have secured a written confirmation from the policyholder to note that the danger of lapse has been fully explained by the agent.
I have learned things through the years working with funeral homes and clients who are at the end of their life that I'm sure most life agents rarely if ever see.
With most families, before a child or even a spouse takes over the finances for an aging adult who has always been in charge of everything, things have to be going real wrong.
I've seen lawyers and school teachers as well as factory workers that won't turn the finances over to someone else once they become too aged or have signs of Alzheimers or memory loss. Kids and spouses won't force it until it is too late and some damage has happened. It's VERY VERY common.
If an agent sells guaranteed UL and makes the family think it is comparable to whole-life, they are misrepresenting the product in my opinion. It's a good product and has it's place but whole-life is a MUCH safer product.
"BUT if ALL someone wants is death benefit AND they want it longer than term can offer AND they are able to pay every month on time or early (never late)" Very well put!
The reality is that premature death often follows a critical illness where the attention of the policyholder and family is distracted by the illness, the cost of care, and attendance to various matters related to the critical illness and suffering by the victim. The potential for missing a premium payment therefore rises, leading to an increased potential for a lapse of coverage, just when it's most needed.
No pilot in his right mind would take off with just enough fuel to make it to the destination and no SCUBA diver in his right mind would stay down to the point where there's just enough air in the tanks to surface. IMO, any life insurance policy which is in danger of lapse if a premium payment is missed should carry a prominent warning of the danger.
As to "minimum premium no lapse UL", IMO, agents should not be selling that product unless they are thoroughly acquainted with the policy wordings in their entirety AND have secured a written confirmation from the policyholder to note that the danger of lapse has been fully explained by the agent.
Great post and right on the money. Whole life is not in danger of lapsing like a UL is.
- - - - - - - - - - - - - - - - - -
Originally Posted by Newby
I have learned things through the years working with funeral homes and clients who are at the end of their life that I'm sure most life agents rarely if ever see.
With most families, before a child or even a spouse takes over the finances for an aging adult who has always been in charge of everything, things have to be going real wrong.
I've seen lawyers and school teachers as well as factory workers that won't turn the finances over to someone else once they become too aged or have signs of Alzheimers or memory loss. Kids and spouses won't force it until it is too late and some damage has happened. It's VERY VERY common.
If an agent sells guaranteed UL and makes the family think it is comparable to whole-life, they are misrepresenting the product in my opinion. It's a good product and has it's place but whole-life is a MUCH safer product.
Newby, you are right on. Everyone seems to want to find a reason not to sell WL but the truth is it is always the best product to have if you want it to be there and pay a death benefit under all circumstances. It will not be the cheapest but it will be the coverage with the lest risk.
The general public has been so brainwashed on BTID that everybody thinks it is the way to go. Like the 70 year old that wanted term until I explained to him that although he could get term he also faced the possibility of out living the coverage. He didn't want term then once he understood. Most people would not want UL if they really understand it.
Last edited by xrac : 06-14-2009 at 06:57 PM.
Reason: Posts merged
Great post and right on the money. Whole life is not in danger of lapsing like a UL is.
- - - - - - - - - - - - - - - - - -
Newby, you are right on. Everyone seems to want to find a reason not to sell WL but the truth is it is always the best product to have if you want it to be there and pay a death benefit under all circumstances. It will not be the cheapest but it will be the coverage with the lest risk.
The general public has been so brainwashed on BTID that everybody thinks it is the way to go. Like the 70 year old that wanted term until I explained to him that although he could get term he also faced the possibility of out living the coverage. He didn't want term then once he understood. [COLOR=Red]Most people would not want UL if they really understand it[/COLOR].
I will disagree. Most people do not want to spend the kind of money it costs for a whole life product for $500k, $1M, etc etc. When they look at a $9,000/year premium versus a $3,500/year premium for the same death benefit, most people will not write the larger check (or for someone in a more extreme example, let's say a $25k premium versus a $10k premium). If they spent a few minutes trying to understand what is being explained to them, it would go a long way. Most people's problem is they just don't want to take the time to understand what they are buying.
I am not saying that there is not a place for UL but the majority of clients and agents don't understanding UL. Therefore a lot of UL polcies have imploded, are imploding, or will implode. UL has it's place for older clients who need a large face amount but cannot afford WL. However, it must be stressed that if premiums aren't paid coverage can lapse. UL versus WL boils down to face amount, time horizon, and guarantees?????????
I am a believer in WL and MY MONEY is where my mouth is. I have a large amount of WL in personal coverage on myself and my wife.
I will disagree. Most people do not want to spend the kind of money it costs for a whole life product for $500k, $1M, etc etc. When they look at a $9,000/year premium versus a $3,500/year premium for the same death benefit, most people will not write the larger check (or for someone in a more extreme example, let's say a $25k premium versus a $10k premium). If they spent a few minutes trying to understand what is being explained to them, it would go a long way. Most people's problem is they just don't want to take the time to understand what they are buying.
Those clients are best served if they do maximum payments (just under what would turn it into an MEC) rather than minimum payments to keep the policy in force. A lot of agents fail to explain that.
Those clients are best served if they do maximum payments (just under what would turn it into an MEC) rather than minimum payments to keep the policy in force. A lot of agents fail to explain that.
That would defeat the purpose....as long as they understand they need to make their payments in full and on time, there are no issues. We have yet to have a single case of a no-lapse UL actually lapse for a missed premium.
So every client should just pay 250% more in premium to make sure that if they forget to make a payment they will still be ok? Give people just a little tiny bit of credit that they can handle their own finances....you are also assuming that there will be $0 cash value in the policy. Many UL policies have performed very well over time and generated significant cash value that would keep the policy going for many years without any payments.
So every client should just pay 250% more in premium to make sure that if they forget to make a payment they will still be ok? Give people just a little tiny bit of credit that they can handle their own finances....you are also assuming that there will be $0 cash value in the policy. Many UL policies have performed very well over time and generated significant cash value that would keep the policy going for many years without any payments.
Which policies have performed very well over time? Two or three clients per month come to me with crashed UL policies. They have done nothing wrong as far as they're concerned. They made ALL their payments on time. And when the company had them increase premiums they did that too. But now the policies are STILL crashing after they have paid MANY thousands of dollars into them.
Call your state insurance commissioner as a consumer and tell them you have a UL policy that you think there is a problem with. The answer you will recieve is that is basically the nature of those policies.
I know the guaranteed UL is a newer version BUT they are designed to have NO cash value build up in the later years. There is no safety net. They are NOT the same as a straight whole-life policy.
They will always have a MUCH higher rate of dissatisfaction at the end of the policy than whole-life. That is undisputable.
I have and will ALWAYS advise any client I sell one to to overfund it.
The majority of UL policies that are crashing right now were sold between the late 70's and late 80's.
During this time inflation was a major problem, and interest rates were sky high. Companies/ Agents were illustrating polices with interest rates averaging 12-19%; while the guarantees were only at 4%. I am sure you would agree that most companies will not allow these type of illustrations anymore; for obvious reasons.
As Dgoldenz has said, and I completely agree, UL policies do accumulate cash value if sold correctly. The amount of CV is obviously determined by the crediting method inside the UL policy, and the amount of premium being paid by the customer.
Scaring somebody into thinking that if they miss one payment with their UL that they will lose their DB is absurd, and borderline fraud.
If the customer is paying the minimum premiums then this is correct in most instances. To assume that every UL policy holder is paying the minimum premiums is ridiculous.
What if you missed a payment on your term policy? Same concept!
This is all dependant upon the premiums in which the insured pays; hence the term "Flexible Premium Universal Life policy."
As it was said many agents do not fully understand how a UL policy works. This in itself is one of the major flaws in our industry; an agent does not have to understand how it works to sell it.
Par/ Non Par WL, Term, UL, and VUL's are all good solutions, but they have to be used in the right way. Great discussion!
------------------------------------ Direct 1-866.417.9580 X 109 mail@ngfgllc.com
I think insuranceexec summed it up pretty well. We have many clients that have generated a significant amount of cash value with their UL policies, some currently over six figures in surrender value. It is a little short-sighted to say that clients will be dis-satisfied. How many of those clients saved $50k or $100k or $200k over the course of time by purchasing the UL instead of the whole life?
Give people just a little tiny bit of credit that they can handle their own finances.....
The question is not whether responsible people can handle their own finances properly and in a timely manner but whether the unexpected (isn't that what insurance is for?) will interfere. For example, see the article on the Harvard study at Medical Bills Leading Cause of Bankruptcy, Harvard Study Finds
[snip]
Most of the medical bankruptcy filers were middle class; 56 percent owned a home and the same number had attended college. In many cases, illness forced breadwinners to take time off from work -- losing income and job-based health insurance precisely when families needed it most.
Families in bankruptcy suffered many privations -- 30 percent had a utility cut off...
[/end snip]
One of the facts of life with critical illness is that its impact - economic and otherwise - extends beyond the victim. As noted in an earlier posting, premature death often follows a period of critical illness.
Having noted that, however, this I'm not suggesting that "whole life" is necessarily a better choice than UL, particularly during the 'early' years.
IMO, one good approach to comparative quantitative evaluations is to examine the respective IRR of the compared products over the years. Comparative IRR evaluations can be done for the DB as well as the CSV and can easily be done on a year by year basis.
Whole Life vs. Index Universal Life
Linear Mode
