Whole Life vs IUL: case study age 50

Whole Life: #1 performing carrier

design: Male, age 50, preferred non-tobacco, $250 monthly planned premium, for maximum cash value accumulation

The best way to solve for maximum cash value accumulation is to do a limited pay. For $250 monthly premiums a lifetime guarantee it solves at 11 years.

11 pay

Initial death benefit: $53,964
premium outlay: $3,000 annual

non guaranteed values: year 15 based on current dividends
cash value $43,879
death benefit $73,975
premium outlay $33,000
dividend year 16: $1,378 annual
dividend year 21: $1,735 annual
age 121 guarantee

15 pay

Initial death benefit: $68,928
premium outlay: $3,000 annual

non guaranteed values: year 15 based on current dividends
cash value $53,207
death benefit $89,650
premium outlay $45,000
dividend year 16: $1,742 annual
dividend year 21: $2,112 annual
age 121 guarantee

20 pay comparison Whole Life vs. Indexed Universal Life (IUL)

Whole Life: $250/month 20 years

Initial death benefit: $84,592

non guaranteed values: year 20
cash value: $80,158
death benefit: $121,536
premium outlay $60,000
age 121 guarantee


IUL: $250/month 20 years

Initial death benefit: $50,000

non guaranteed values: year 20 @5.75% all years
cash surrender value $81,301
death benefit $131,301
premium outlay $60,000
age 96 guarantee

Comments: Makes sense at age 50 to solve the whole life product for 15 years to build cash value and higher dividends for retirement income, but an 11 pay is all that’s required to lock in a lifetime guarantee. IUL needs longer funding, more like a 20 pay than 15 pay. IUL advantage is in premium flexibility. Whole Life requires a longer commitment to premium payments before sufficient dividends can offset premiums. Whole Life offers a better lifetime revenue stream with annual dividends than an IUL with loans or partial withdrawals.

Survivorship Universal Life: age 105 versus age 120

Protective Life is reintroducing their life insurance survivorship product “Protective Survivor UL” which will replace “Protective Centennial Survivor GUL”.

Survivorship, or second-to-die life insurance is for couples for estate planning purposes.  It is much less expensive than taking out two policies, and can provide coverage even if one of the couple has health problems and is uninsurable.  Guaranteed Universal Life is far less expensive than traditional whole life insurance.

Notable is the trend of certain carriers away from lifetime guarantees.  Though lifetime is available, Protective Survivor UL is competitive to age 105 and lesser ages.   Given the projected rise in the number of centenarians in the coming decades, selecting coverage to age 120 is advisable, since there are still multiple carriers like Prudential and American General that offer these lifetime guarantees at competitive rates.

Mail offers from United of Omaha for whole life insurance: why you should not return

Like everyone else I get mail pitching life insurance. United of Omaha last week mailed me an offer for “Easy Way” whole life insurance. Coverage is up to $10,000. No health exams.  Guaranteed acceptance. It took me a few minutes to find the key term tucked into the brochure as the last of 10 benefits. That’s the place where they got around to mentioning it was a graded death benefit.

 

During the first two policy years, if you die from natural causes (and cause other then accidental), your beneficiaries will received all premiums paid, plus 10%.  After two years, the full benefit is paid for death due to all causes.

 

Note: there is no life insurance benefit for 2 years, only money back plus interest, unless it’s an accidental death.

Easy acceptance is not the best life insurance. It’s the most expensive. Find your best option:

  • 1st choice:  Life insurance that requires a blood test.   Saves lots of money.  Called fully underwritten life insurance
  • 2nd choice:  Full and immediate benefit life insurance called simplified issue whole life
  • 3rd and last choice:  graded benefit life insurance, guaranteed issue

 

Guaranteed issue is only suitable when in extremely poor health, terminally ill or uninsurable because of a condition like AIDS.

 

Check first to see if you qualify for better coverage. Even if guaranteed issue is the only option, shop for the best premium.  There are many companies that offer graded benefit coverage besides United of Omaha.

 

Please contact me for a free and confidential quote.

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Licensed Agent:  Sean Drummey
phone:  (910) 328-0447
email:    spdrummey@gmail.com

 

 

 

Carrier:
United of Omaha Life Insurance Company
a Mutual of Omaha Company

 

John F. Kennedy’s life insurance letter at age 30

The National Archives and Records Administration has contributed over 100,000 photographs and documents to Wikimedia Commons, including these two regarding President John F. Kennedy.

Kennedy’s $10,000 life insurance policy in 1947 in all likelihood originated during his Navy service during World War II.  Looks like he’s wearing his PT-109 tie clip in this 1962 photo.  Pierre Salinger grew up in cool gray San Francisco, also ex-Navy, so he deserved presumably being kidded for bundling-up out on the water in September.

Life insurance after a major health problem: Modified Whole Life

Final Expense Options
Individuals, mostly seniors, looking for final expense coverage have four choices.  Their desirability is in descending order:

  1. fully underwritten Guaranteed Universal Life (GUL)
  2. simplified issue whole life
  3. modified benefit whole life
  4. guaranteed issue whole life,  also called graded death benefit whole life

Regrettably, profit and volume driven marketers, including AARP, not acting in their client’s best interest, skip over option #1 to concentrate on the easier to write and faster to place options #2, #3 and #4.

Look for
Option # 1, Guaranteed Universal Life starting at $25,000 in coverage is very cost effective coverage.  Full and immediate benefit. Fully underwritten, it requires a blood tests and carriers usually review 5 years of medical records.   Applications take on average 6 weeks and require from the agent and brokerage good old fashioned time and expense, and have a lower placement ratio.  That’s why certain marketing organizations, including direct mail, phone and mail solicitations, don’t want to get bogged down doing them, even though it’s in the client’s best interest.

Plan B
Option #2, Simplified Issue Whole Life, is full and immediate benefit, comes into play for affordability, smaller policies $3,000 to $8,000.  Also the underwriting is less strict, no blood test or medical records, usually only MIB * check and prescription drug check, and helps with coverage if a serious condition occurred two or more years ago.   Remember a $25,000 Guaranteed Universal Life cost about as much as a $10,000 whole life, so make sure to consider option # 1 before settling on option # 2.  See here ages 60 to 69 whole life quotes.  See here ages 70 to 70 whole life quotes.

Option #3   Suitable for those who have had a major health problem but having occurred  over two years ago.

Option # 4    No health questions.  Basically, all one needs is be cognitively and physically able to sign the application.

Modified Benefit Whole Life
The beneficiary receives a percentage of the death benefit in the first few coverage years.  The percentage rises and generally by the 4th year there is a full benefit.


Guaranteed Issue Whole Life
  also called  Graded Benefit Whole Life
No health questions.  Coverage is characterized by a waiting period for the full life insurance benefit.   The waiting period is typically 2 or 3 years.  If the insured dies during this waiting period, the beneficiary receives a return of premium plus interest, typically 5% or 10%.  After the waiting period, it’s the full death benefit.   The application question are limited, and coverage is not available only if the individual has a terminal condition or bedridden.

This doesn’t sounds bad, if you’ve had recently something like cancer or a heart attack and really need coverage. What’s the catch?  Well, Modified Whole Life is relatively expensive.  One of the best ways to judge this coverage is to divide premiums into the death benefit to see at what point cumulative premiums exceeds death benefit.  For example with Liberty Bankers Life a 71 year old female.

$99.88 monthly for $10,000  Face Amount  – Modified Whole Life

Years 1 – 3  benefit equals return of premium plus 10%
Year 4  death benefit 100%
Year 5  death benefit 105%
Year 6  and thereafter 110% benefit

In this example, Year 6 and thereafter a 110% of face amount is an $11,000 death benefit.    Annual premium is $1,198.56   ($99.88 x 12)

$11,000 / $1,198.55 =  9.2 years.     Thus, cumulative premiums exceed the death benefit after a little over 9 years.

Whether or not this is a good value depends on the individual’s health condition and life expectancy.  In the example above: will this 71 year old live into her 80’s?  If she does, the owner ends up paying more in premiums than receiving in benefit.

Please contact me for a free and confidential quote.

Licensed agent: Sean Drummey
phone: (910) 328-0447
Email: spdrummey@gmail.com

(* MIB  Medical Information Board,  checks prior life insurance applications)

Revised: 8/22/14

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Simplified Whole Life: Affordable Even in your 70’s

Cremation is inexpensive.  Prices vary but scattering one’s ashes might run in the $1,000 range. Simplified issue whole life insurance is also inexpensive.   A $3,000 in coverage for a female non tobacco is about $20 a month at 70 and $38 a month at 80.  Here are sample quotes those in their 60’s and in their 70’s.  Simplified means a only short questionnaire and no blood test.

If you haven’t had any really, really bad health problems, or they were over 2 years ago, you can qualify for simplified issue.  It’s full and immediate benefit life insurance, unlike some life insurance pitches you see on TV or get in the mail.   I recommend Liberty Bankers Life to my clients.  Good idea to get one of these while you’re fairly healthy and before hitting 80.