September 16, 2020
New West Short
Clients wanting Guarantees?

Of course they are.  But, with more carriers leaving the GUL space and those that remain continuing to increase premiums, this is becoming a harder request to fulfill. 

A Protection Index UL may be a better option.  Let’s take a look at a recent case study:  Male 50, Preferred non-tobacco, $1,000,000 death benefit.

Leading GUL carrier (usually in the top 3), full pay premium to guarantee policy to age 100 is $9,180 and at current rates they project a cash value in year 20 of $45,900.

A Protection IUL with a Guaranteed No-Lapse to age 85 (payable to age 100) is $8,470, saving the client $710 annually.  So you are going to say, yes, the Protection IUL is cheaper - but it is only guaranteed to age 85.  That is true, however let’s look at the benefits you give up with a GUL to get those extra 15 years of guarantees:

The sample GUL contract had a non-guaranteed cash value of $45,900 in year 20 which is rare for most GUL contracts.  Most GULs have $0 cash value.  At a current hypothetical rate of 5.92% the client will have $192,900 cash value in year 20. 

With cash value growth the client will have more of an opportunity to 1035 Exchange into newer products in the future.

If the S&P 500 performs as it has in the past, the client will have the flexibility of lowering premiums or skipping premiums in the future.  Try skipping premiums with a GUL.

Paying premiums early will improve policy performance as opposed to most GULs.  If GUL premiums are paid before any grace period, there is an adverse effect on the guarantees.

The client will have access to the cash value for policy loans or withdrawals should the need arise.

If you fund a GUL to guarantee the death benefit to age 100 and the client outlives the guaranteed period, it is extremely expensive to carry that coverage beyond age 100.  In this example, the Protection IUL, illustrated at a conservative 2.75% hypothetical rate of return, will carry the policy to age 90.  At the current rate of 5.92%, the policy will carry to age 114.  

For the same premium as the GUL ($9,180) the client can add a LTC rider.  In this case they will get a $10,000 monthly LTC benefit.  Policy still guaranteed to age 85 and at current rate will carry to age 112.

It seems that is a lot to give up for an extra 15 years of guarantees that are beyond most individuals' life expectancy.  So, when your client calls for a GUL illustration, consider also showing a Protection IUL as an alternative. 

Call or email me for illustrations and product information: 

Melissa Church
Director of Marketing
208-622-5211 x 2
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