Explain all life in comparison to the guaranteed universal life


    The following letter is from a response I wrote to a consultant who asked for articles that discussed the differences between Life Insurance (WL) and Guaranteed Universal Life Insurance (UL). Not only does it cover simple differences, but also some conflicting advice / feedback that the customer is getting from the market.


    Hello Tim:

    It was good to chat this morning. I understand what you’re looking for when you’ve asked for items that compare and differentiate WL from guaranteed UL products on the market. What sounds so simple is, however, as mentioned earlier, not so easy to find.

    I thought I’d try to talk this through and maybe that’s enough for your clients now.

    As far as I understand, your customer currently has a common WL. WL is a perfectly good life insurance product, but it comes in different forms and I often find that policyholders don’t understand what they really have. For example, one of the biggest misjudgments is that the policy they believe is a traditional WL is actually a significant portion of term life insurance. In fact, I’m currently working on a situation for a business owner in Grand Rapids who has $ 1 million on his hands mutual WL policy from a well-known and highly rated provider Issued in 1990 with a WL of $ 1,000 and term life insurance of $ 999,000. He had no idea. In view of the sharp collapse in the interest rate market and the associated decline in Dividend rate of the airline that credits the policies, the policy fails severely and will likely never pay the death benefit unless material changes are made.

    This is different from real traditional WL. However, many of these WL policies have some mix of maturities and this is heavily influenced by the low interest rates and low credit risk for insurance dividends. It is extremely important for policyholders to understand that only the original WL portion of the policy had a guaranteed premiumAh. Many of my clients have found, to their chagrin, that they have to pay significantly more premium or premium years than expected, and the present value and death benefit do not go anywhere near the original projections.

    There are several types of permanent, cash value life insurance policies on the market. These include the WL policies discussed above, traditional UL, variable WL and variable UL, indexed UL, as well as guaranteed UL and guaranteed variable UL contracts. There are additional products on the market with some unique nuances and each of these contracts is available in an individual or survivor life format.

    Most of my work with the entrepreneurship community is in fiduciary life insurance to provide liquidity for inheritance tax planning and corporate succession planning. That being said, we generally focus more on death benefit products than life insurance contracts that are designed to have significant cash value. It’s important to understand that in the life insurance world, you don’t actually have and can eat your cake. It is an ongoing game of horse trading where you give up one thing for another. For example, you can waive the cash value for death grants and premium guarantees. Some policies have more upside potential than others. Some do better at different times in life. With low premiums, guaranteed premiums and death benefits as well as a significant cash value and upside potential, there is usually nothing to be found.

    In my market for my customers who are looking for life insurance for death Services, we generally consider guaranteed products. Although guarantees are often associated with higher costs, this is not always the case with life insurance. Since so much depends on the death benefit being used for planning purposes and these entrepreneurs already taking significant risks in their inheritance, guarantees are very attractive. Also, because they focus on the death benefit, they don’t put much emphasis on substantial cash value, although they dowould of course take everything at once. Many also appreciate flexible premium products, as their cash flow can fluctuate from year to year. Have WL life products limited Flexibility, while UL products have flexible rewards to some extent.

    With these goals in mind, we’ve focused on guaranteed UL for the past two decades with guaranteed indexed UL and guaranteed variable UL when available. NSThese products have a guaranteed premium and a guaranteed death benefit and generally hasve was the lowest priced Life insurance. Conventional WLs without mixed maturities usually have a much higher premium and accumulate more cash value in the long term. It likely has a growing death benefit, so the projected internal rate of return on the life expectancy premium may be similar, but there are big differences in how you get there. It’s neither right nor wrong, just different.

    However, given the financial dynamism of the market, insurance companies have struggled to make money with their money, and given some changes in the regulatory market, the prices of UL guaranteed products have generally increased over the years and many companies are no longer in that market at all.

    My concern about this has diminished because of the further availability of guaranteed variable UL products. While it may seem like a contradiction in terms, although these products are invested in the securities markets, they also offer a guaranteed premium and death benefit. They remain competitive because they are not so dependent on the interest rate markets and because they follow different regulatory rules. Also, an often overlooked but important aspect of these contracts is that the cash values ​​are segregated accounts, meaning that they are segregated from the insurance carriers and creditors of these companies. Even if a life insurance company were to give up, the cash value in the separate accounts would not be on the table like the cash value in traditional life insurance products.

    In my experience, the premiums of these policies are very competitive, policyholders have a choice of how the cash values ​​are invested in a variety of sub-accounts, both premium and death benefit are guaranteed, and there is upside potential if the sub-accounts are overdrawn the time well. What I mean by that is, if present values ​​grow enough, they will increase death grants over time so that ultimately more death grants can be paid than was originally guaranteed.

    In today’s market, the product du Jour is UL-indexed. There is a great story behind these products that many agents suggest. They are touted as life insurance products with the upside potential of the market with no downside risk. While this is true in some ways, these are some of the most complicated products on the market, but very few people including consultants and agents understand them and they just don’t work the way many people believe they do. I have researched, analyzed and written a tremendous amount about these contracts and I am not a fan. I will not go into detail here, but I would be happy to discuss as deeply as possible how anyone is interested.

    I’ve always said that there aren’t as many bad life insurances as there are badly made life insurances. Also, many agents are heavily institutionally indoctrinated by the insurance companies they primarily work with. This was one of the most revealing discoveries over the years. Insurance companies build all of their education and marketing around the products they specialize in and want to sell so that their agents do the same, largely because they have little other perspective.

    Another segment of the sales market will simply follow the in-product of the day, which was largely developed, advertised and placed due to the temporary economic dynamics of the financial markets. They sell what is easiest to sell at the time and change when circumstances do. I see this happening like clockwork. From the traditional WL policies of the old days, to the evolution of UL in the high yield environment of the late 70s and early 80s, to the variable life insurances that took advantage of the hot stock market in the 90s, to the guaranteed policies in the 2000s to consumers tired of disappointment, to the indexed policies marketed with aggressive assumptions that appear so attractive when the insurance companies realize they couldn’t support the prices of their previous contracts. It can be demoralizing.

    Since the fastest growing aspect of my practice is litigation assistance and working as an expert witness, I learn a lot about what goes wrong in the insurance world. Something that is a little counterintuitive to many people is that it doesn’t matter how highly rated the insurance carrier is. They all have similar products based on similar investment portfolios that are sold to similar individuals by executives and agents with similar inclinations and incentives.

    It is extremely important to work with someone who has no affiliation with a particular insurance company or an incentive to sell certain products. An expert needs to study the pros and cons of a particular product and align it with the goals and objectives of a particular customer and the situation at hand. I rarely see that in the real world either.

    For the past few months I have been discussing guaranteed securities contracts with you because, based on my expertise and experience, these are the products that best serve many of my clients. They aren’t for every situation, and we have a large portfolio of companies and products to choose from when they aren’t.

    As I said at the beginning, this is not what you were originally looking for, but it is the best I can do today. I’ll be happy to research more articles, but I’m not sure if you or your clients want to spend time digging into them. Ultimately, facts are facts and numbers are numbers. I love to carry anything you want to see and compare it to everything else in the market. Objective black and white data is what your customers need.


    Bill Boersma is CLU, AEP and LIC. For more information, see www.OC-LIC.com, www.BillBoersmaOnLifeInsurance.info, www.XpertLifeInsAdvice.com, www.LifeLoanRefi.com, www.TheNAPIC.org, www.LifeInsExpert.com or email to [email protected].

    The guarantees described in this letter are limited to the performance of the respective insurance company. Securities offered by Valmark Securities, Inc. Member of FINRA, SIPC

    OC Consulting Group and its affiliates are separate entities from Valmark Securities, Inc.


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