Category: Penn Mutual

Survivorship Indexed Universal Life for cash value accumulation

by

July 8, 2016

4:54 PM

Leave a comment on Survivorship Indexed Universal Life for cash value accumulation

2016, Cash accumulation, Indexed Universal Life, maximizing cash value, Penn Mutual, Second-To-Die Insurance, Survivorship Life Insurance

In a quote comparison of Survivorship Indexed Universal Life (IUL) products with cash value accumulation as the objective, Penn Mutual outperformed the competition with their “Survivor Plus IUL” plan.

A Surviviorship Indexed UL, second-to-die benefit, will tend outperform an individual Indexed UL for cash value accumulation.  The cost of insurance on two lives for one death benefit is lower than on a single life, so it makes sense for a couple to consider a survivorship product.

Here were the parameters for this case study:

Premium Amount: $250,000
Solve For:  Minimum Non-MEC *
Death Benefit Option: Increasing
Illustrative Rate assumption: 6% (all years);  S & P 500 annual point-to-point
insureds:  both mid ’50’s, both preferred non tobacco
objective: cash value accumulation, downside protection

Penn Mutual was able to solve as a “3 pay”, dividing the $250,000 premium into three annual payments, and maintain competitive cash value accumulation to a 4 pay, which is unusual.  When evaluating  a limited pay scenario, one works down from a “7 pay” non-MEC structure to see where optional cash value accumulation occurs. A 5 pay or 4 pay is most common.  Penn Mutual’s cash value accumulation was superior to the competition looking at years 5, 10, 15 and 20 and on out in 5 year increments.  PennMutual’s has a 2% floor on both its fixed and indexed account, giving their product superior downside protection.

Each case is different in age, health, premium amount and objectives, so it’s not a hard and fast conclusion that PennMutual Survivor IUL will be the superior product, but the next time a cash value accumulation case comes up Penn Mutual will be serve as a benchmark.

  •  Non-MEC =  not a Modified Endowment Contract

Long term care type benefit with Protective Life

by

May 30, 2012

2:17 PM

Leave a comment on Long term care type benefit with Protective Life

cash benefit, hybrid long term care insurance and life insurance, Indemnity Benefit, life insurance and long term care, long term care diagnosis, Penn Mutual, Penn Mutual Life Insurance Company, Protective Life, Protective Life Insurance Company

Protective Life has a long term care services rider available on their universal life insurance product “Centennial G II”. This allows the life insurance benefit to accelerate out when the insured is certified by a licensed health care practioner as chronically ill, meaning unable to perform two out six activities of daily living or severe cognitive impairment.  This LTC type benefit is a very valuable added plus to include in a life policy.  It’s there just in case, and if not needed or if only some benefits are needed, the remaining death benefit goes to the beneficiaries.

Payouts with Protective’s plan are an indemnity payment method, full direct benefit payments, which is much preferable over the reimbursement method, repayment of bills or receipts.   Maximum is $8,500 per month, and the benefit can be 100% of the policy value.  Lump sum payment is also available.

Protective’s $8,500 per month maximum accelerated benefit is better than most carriers, but a few competing plans are based on percentage of the policy benefit which allows a higher acceleration.  For example, Penn Mutual allows 24% of the policy benefit, maximum $240,000 accelerated per year.

Indexed Universal Life (IUL) index rates: how to request quotes to compare carriers

by

February 27, 2012

2:04 PM

Leave a comment on Indexed Universal Life (IUL) index rates: how to request quotes to compare carriers

Index Selections, Lincoln Life, Lincoln National Life Insurance Company, Penn Mutual, Penn Mutual Life Insurance Company, quote illustration, S&P 500

Lincoln has changed the name of their Indexed Universal Life (IUL) product to “Lincoln LifeReserve Indexed UL Accumulator”.  They changed their default quoting rate on the S & P 500 annual point-to point to 8.22%.  This is based on a 30-year historical Lookback rate.  Before this Lincoln’s default rate was 7.75%.

Using a higher rate seems counter factual considering the S & P 500 was a flat 0% for 2011, despite so far enjoying a much better 2012.  Showing a higher rate reflects competitive pressures.  One carrier’s current default rate on the S & P is 8.30%.  A carriers competitiveness could suffer when another is showing higher rate on the exact same index and crediting period.   The rate quoted and the calculation method depends on the carrier.  Penn Mutual is currently illustrates 7.92% for the exact same S & P 500 annual point-to-point.   Tranamerica gives 7.93%.  Allianz  gives 7.22%.

The important consideration from a buyer’s point of view is to take all these rate assumptions with a grain of salt.   Sure the S & P could average 8% or above over the next several decades, but it could also average lower.   Request quotes with the exact same rate assumptions for a closer apples-for-apples direct comparison.   With Lincoln, North American and Penn Mutual, I use Penn Mutual’s 7.92%.   It would be nice to level them all to an even 8%, but most carriers including Penn Mutual won’t allow plugging in a rate higher than their default rate.

Depending on the index, the default index rates are in the 7% to 8% range.   It’s prudent to request a quote illustration with interest rates several points lower,  for example 5% or 6%,  to see how those hypothetical results would affect your goals.

Nationwide’s new Indexed Universal Life (IUL) compared to top Lincoln and Penn Mutual

by

December 4, 2011

10:15 AM

Leave a comment on Nationwide’s new Indexed Universal Life (IUL) compared to top Lincoln and Penn Mutual

1 year point-to-point, Age 65, Income distribution, Increasing death benefit for cash accumulation, Level death benefit for maximum income distribution, Level Face Amount for maximum income distribution, Lincoln Life, Maximum cash accumulation Indexed UL, MEC limit, Nationwide, Overfund, Penn Mutual, tax-deferred accumulation, tax-free loans

Nationwide has a new IUL product called “Yourlife Indexed UL”.   I’ve posted a series of comparisons analyzing the top performers for tax deferred cash accumulation and tax-free retirement distributions, so I plugged in those assumptions to see how Nationwide compared.  Granted, it’s not a true apples-for-apples comparison.  The index selection for Lincoln and Penn Mutual is the S & P 500, 1 year point-to-point. Lincoln assumes a 8.45% hypothetical return and Penn Mutual a 8.41%.    Nationwide uses a weighted average multi-index  blended strategy, 1 year monthly average, assuming a 7.6% index crediting.

Only time will tell on upside assumptions.  While pondering the unknowns of the future, it’s good to remember the strength of indexed universal life is knowing there is a floor to stand upon.

Below are figures to the same benchmark structure: male, age 44, great health puts in $25,000 a year for 20 years, and at age 65 the takes out tax-free retirement income for the next 20 years in the form of policy loans, with enough left over for a death benefit.   $25,000 a year might be above what you’re considering, but showing high premium is like a drag race to see how fast the car will go, fast as in building cash value, and then popping the chute, projecting how the retirement distribution performance.

Carrier Cash Value
Year 20		 Death Benefit
Year 20		 Loan amount
Yrs  21 -40		 Cash Value
Year 41		 Death Benefit
Year  41
Lincoln  1,072,791  1,611,714  146,428  831,161  1,121,364
Penn Mutual  1,148,802  1,738,802  145,609  522,606     841,829
Nationwide     933,926  1,503,928  119,820   89,900     302,664

With the goal being maximum retirement income, knowing the carrier’s options and rules on policy loans is vitally important.   Nationwide has a fix loan option “declared rate loan”  that showed a $88,236 income distribution on the policy illustration.  For potentially better performance, like many other carriers Nationwide has a variable loan option “alternative loans” based on Moody’s Corporate Bond Yield Average, currently Nationwide illustrates at 4.79%, which gave a better $119,820 income distribution figure.  But what will that figure be in the future?  They have a guaranteed minimum of 3.00% and a guaranteed maximum rate of 8%.

Both Lincoln and Penn Mutual have fixed rate loan options that project better than the variables loan rates of the competition, including Nationwide.

Lincoln National Life Insurance Company:     “Lincoln LifeReserve Indexed UL  (2011)”
The Penn Insurance and Annuity Company:    “Accumulation Builder II IUL”
Nationwide Life and Annuity Insurance Company:  “Yourlife Indexed UL”.

Image Source: Wikemedia Commons

Disclaimer: Information and quotes are current and accurate to the best of my knowledge on December 4, 2011.  Product features and rates are subject to change.  Quotes are non-guaranteed projections based on current interest rates and cost of insurance. Tax information is general information only. Please seek professional tax advice for personal income tax questions and assistance.

Surrender Charges on IUL

by

November 28, 2011

4:57 PM

Leave a comment on Surrender Charges on IUL

Cash accumulation, Cash Value, Equity Indexed Universal Life Insurance, Estate Planning, In your 40's, In your 50's, Indexed Universal Life, Lincoln National Life Insurance Company, Modified Endowment Contract, Penn Mutual, Retirement income

It’s always good to know the rules for getting money back, so I compared surrender charges for indexed universal life (IUL) carriers.  Surrender charges decrease on a declining schedule.  For the carriers I compared, it takes between 10 to 20 years for those charges to completely go away.  Not surprisingly, Lincoln and Penn Mutual were among those most favorable.

Penn Mutual is the best: no surrender charges after the 9th year, also no surrender charges in excess of target premium.

Target premium is a premium designed maintain a permanent policy for life.  Mind you target is a guidepost for keeping the policy in force, how the policy performs may require more or less premium.  With Indexed Universal Life one strategy is to over fund the policy above target to build additional cash value.  Of the carriers I surveyed, only Penn Mutual and Old Mutual did not require a surrender charge on that portion of the premium.

For example, as in prior comparisons: male age 44, over funding an Indexed UL with $25,000 in premium for 20 years in order to generate tax free retirment income in the form of policy loans.  With Penn Mutual this is a $590,000 increasing face amount policy, and the given target premium is $7,918 a year, but by over funding it with $25,000 in premium, just under the IRS limit for a Modified Endowment Contract (MEC), the policy builds the maximum permissible tax free cash value. That amount between $7,918 and $25,000 would not be subject to surrender charges at any time with Penn Mutual.

The least amount of surrender charges in the shortest period of time is a distinct advantage for an Indexed Universal Life in case there is a change in plans.

Sean Drummey
Contact for a free quote
Phone: (910) 328-0447
Email:  spdrummey@gmail.com