Accumulation VUL Questions...
Accumulation VUL Questions...
Hey guys...I've got an Accumulation VUL thru John Hancock that was sold to us by a financial advisor (that I no longer use), as a college savings plan for our son (now 10).
We started it in 2008.
It is a $500k policy with a $1200/qtr payment.
Current Value is $52658
Current Cash Surrender Value is $52064
Seems from reading the forums that these policies are generally frowned upon because of high fees...Is this something that I should be transitioning to a different type of investment?
What are the consequences tax-wise??
Any advice/experience, much appreciated!
We started it in 2008.
It is a $500k policy with a $1200/qtr payment.
Current Value is $52658
Current Cash Surrender Value is $52064
Seems from reading the forums that these policies are generally frowned upon because of high fees...Is this something that I should be transitioning to a different type of investment?
What are the consequences tax-wise??
Any advice/experience, much appreciated!
Re: Accumulation VUL Questions...
Do some reading about it. Sorry, I wouldn't buy, but don't know when to sell this expensive policy. Ask company for an "in-force illustration". Here is some information from FINRA:
http://www.finra.org/investors/alerts/s ... nce-policy
http://www.finra.org/investors/insurance
http://www.finra.org/investors/alerts/s ... nce-policy
http://www.finra.org/investors/insurance
Re: Accumulation VUL Questions...
I should point out that we are (obviously) overfunding with a planned premium of $1200/qtr..I believe the actual premium is $72. (total fees/charges of ~$165/qtr.)
It looks like currently, even with the high fees/charges that we are "up" ~$10-12k.
Should I continue down the same path until the surrender charge is $0 (~1.5 years), or eat the $600 now.
What re-investment can occur to minimize tax issues...transfer to a Vanguard Annuity? ...and then??
TIA
It looks like currently, even with the high fees/charges that we are "up" ~$10-12k.
Should I continue down the same path until the surrender charge is $0 (~1.5 years), or eat the $600 now.
What re-investment can occur to minimize tax issues...transfer to a Vanguard Annuity? ...and then??
TIA
Re: Accumulation VUL Questions...
Anyone else have an opinion or advice on this account/situation?
TIA
TIA
Re: Accumulation VUL Questions...
Another place to look for comments is at WhiteCoatInvestor since doctors are often targets for sale of such products. He does seem to disclose any conflict-of-interest which is pretty rare these days. Also he has shared good advice on Bogleheads, so I may be a bit biased as well. Anyway dig into the site by searching. Here is the first one I came up with:
http://whitecoatinvestor.com/variable-u ... t-account/
Don't stop with just one article.
Did you get that "in-force illustration"? Insurance companies like to obfuscate the information they don't want you to understand, so that may be the most clear info you can get on your particular policy.
http://whitecoatinvestor.com/variable-u ... t-account/
Don't stop with just one article.
Did you get that "in-force illustration"? Insurance companies like to obfuscate the information they don't want you to understand, so that may be the most clear info you can get on your particular policy.
- LAlearning
- Posts: 1365
- Joined: Wed May 09, 2012 12:26 pm
- Location: Los Angeles
Re: Accumulation VUL Questions...
probably get rid of it. but since you have had it for 8 years you need to run the specific timetable numbers to see what makes sense.
and get TERM life insurance in place before you get rid of it.
but basically its a sunk cost, a mistake. i would reset and move on.
and get TERM life insurance in place before you get rid of it.
but basically its a sunk cost, a mistake. i would reset and move on.
I know nothing!
Re: Accumulation VUL Questions...
I would think "eating" the $600 surrender charge now might be cheaper then paying expenses over the 1.5 years remaining. Since it's variable your "current surrender value" may be subject to market risk as well.
The closest helping hand is at the end of your own arm.
Re: Accumulation VUL Questions...
This policy insures my 10yo...I have term life for myself and my wife, in force already.LAlearning wrote:probably get rid of it. but since you have had it for 8 years you need to run the specific timetable numbers to see what makes sense.
and get TERM life insurance in place before you get rid of it.
but basically its a sunk cost, a mistake. i would reset and move on.
I would like to move-on...just need some insight on the best vehicle to continue to invest the $50k towards college.
Right now it appears that I am only out the $600...Sure the $40k might have been able to make more over 8 years, in a different investment...and I'm not sure I understand/know the tax consequences...but...I''m "up" $10-12k...no?
Re: Accumulation VUL Questions...
Depends on how the market does...123 wrote:I would think "eating" the $600 surrender charge now might be cheaper then paying expenses over the 1.5 years remaining. Since it's variable your "current surrender value" may be subject to market risk as well.
I'll post the breakdown for the investments in the policy, later today.
TA
Re: Accumulation VUL Questions...
What does this mean? This sounds like insurance salesman language.buldogge wrote:This policy insures my 10yo...
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Re: Accumulation VUL Questions...
???David Jay wrote:What does this mean? This sounds like insurance salesman language.buldogge wrote:This policy insures my 10yo...
That's how the policy cover page reads.
$500k death benefit...insured is my son...policy holders are my wife and I.
Re: Accumulation VUL Questions...
My wife was two sold VUL policies by her financial advisor before we met. We no longer use the financial advisor either. However, after my wife and I got married and we started combining finances, I had a lot of trouble understanding the VULs. It was my research to understand whether they were good investments or not that led me to both Bogleheads.org and The White Coast Investor (http://whitecoatinvestor.com/). The latter is a blog/forum site run by Dr. James Dahle (medical doctor, hence the name of the website), who is also a frequent contributor on Bogleheads forum.buldogge wrote:Hey guys...I've got an Accumulation VUL thru John Hancock that was sold to us by a financial advisor (that I no longer use), as a college savings plan for our son (now 10).
I recommend reading his blog article "How to Dump Your Whole Life Policy" which is here - http://whitecoatinvestor.com/how-to-dum ... fe-policy/
That article, especially the comments are very helpful. Between the forums here and that article/comments at The White Coat Investor, I was able to understand how the policies work, and whether it was good to keep them or not. Some key points that I've learned:
- Cash value life insurance (whole life, universal life, variable universal life, indexed universal life, etc.) are almost always bad investments to buy due to the exhorbitant fees. Unlike other financial products like mutual fees which usually charge fees over time (such as 1%), insurance products are usually paid upfront. While you don't necessarily see the fees directly, as you can see, you've paid almost $53,000 to date, and you only have about $650 to show for it.
- Because of the high fees, there are high commissions for sales people. Financial advisors have a strong incentive to sell these products because insurance companies pay them a lot of money to sell these products.
- Insurance companies make these policies/investments difficult to understand, which is to their advantage.
- The worst part of these investments are the initial years. Sometimes it may make sense to keep the investments. However, it is difficult to evaluate them. You need to get an "in-force illustration" to understand what your returns will be going forward.
- One of the most helpful tips I got from both Bogleheads and The White Coast Investor, was to engage James Hunt of EvaluateLifeInsurance.org. I requested in-force illustrations from the insurance company for the two indexed, universal life insurance policies my wife, and he determined it was best to get cancel one and retain one. He rates are extremely affordable ($75/policy, or at least that was what it was 2.5 years ago), and made it much easier for me to understand how to compare them. He helps people unwind from these investments, as well as compare products when policies when they make sense. I highly recommend him.
- If you do cancel, there are some ways to take the sting out with taxes. All the various approaches requires as a first step to convert the Life Insurance policy to variable annuity. I would recommend that a no load, low fee variable annuity, such as one offered by Vanguard (this is what I did with my wife). See the article on The White Coast Investor for more information.
- Once you have a variable annuity, you can do a few things. 1. Let it grow back to its original basis (in your case, this would mean investing the $650 in variable annuity, and once it reached $53,000, you could then withdraw it and there would be no taxes, but good luck growing that $650 to $53,000. 2. Cancel the variable annuity and claim a loss (in your case, it would likely be about $52,000). There are multiple ways to claim a loss, some more aggressive than others, and there historically has been debate on how to claim it. However, in 2014 the IRS issued guidance on "proper" way to claim a loss. See my comment in the article on The White Coat Investor from June 24, 2015.
- Feel free to PM with any questions.
Re: Accumulation VUL Questions...
I'm obviously confused...I've paid in $40,800...the current value (after surrender) is $52k...the surrender charge is $650.noraz123 wrote:My wife was two sold VUL policies by her financial advisor before we met. We no longer use the financial advisor either. However, after my wife and I got married and we started combining finances, I had a lot of trouble understanding the VULs. It was my research to understand whether they were good investments or not that led me to both Bogleheads.org and The White Coast Investor (http://whitecoatinvestor.com/). The latter is a blog/forum site run by Dr. James Dahle (medical doctor, hence the name of the website), who is also a frequent contributor on Bogleheads forum.buldogge wrote:Hey guys...I've got an Accumulation VUL thru John Hancock that was sold to us by a financial advisor (that I no longer use), as a college savings plan for our son (now 10).
I recommend reading his blog article "How to Dump Your Whole Life Policy" which is here - http://whitecoatinvestor.com/how-to-dum ... fe-policy/
That article, especially the comments are very helpful. Between the forums here and that article/comments at The White Coat Investor, I was able to understand how the policies work, and whether it was good to keep them or not. Some key points that I've learned:Good luck.
- Cash value life insurance (whole life, universal life, variable universal life, indexed universal life, etc.) are almost always bad investments to buy due to the exhorbitant fees. Unlike other financial products like mutual fees which usually charge fees over time (such as 1%), insurance products are usually paid upfront. While you don't necessarily see the fees directly, as you can see, you've paid almost $53,000 to date, and you only have about $650 to show for it.
- Because of the high fees, there are high commissions for sales people. Financial advisors have a strong incentive to sell these products because insurance companies pay them a lot of money to sell these products.
- Insurance companies make these policies/investments difficult to understand, which is to their advantage.
- The worst part of these investments are the initial years. Sometimes it may make sense to keep the investments. However, it is difficult to evaluate them. You need to get an "in-force illustration" to understand what your returns will be going forward.
- One of the most helpful tips I got from both Bogleheads and The White Coast Investor, was to engage James Hunt of EvaluateLifeInsurance.org. I requested in-force illustrations from the insurance company for the two indexed, universal life insurance policies my wife, and he determined it was best to get cancel one and retain one. He rates are extremely affordable ($75/policy, or at least that was what it was 2.5 years ago), and made it much easier for me to understand how to compare them. He helps people unwind from these investments, as well as compare products when policies when they make sense. I highly recommend him.
- If you do cancel, there are some ways to take the sting out with taxes. All the various approaches requires as a first step to convert the Life Insurance policy to variable annuity. I would recommend that a no load, low fee variable annuity, such as one offered by Vanguard (this is what I did with my wife). See the article on The White Coast Investor for more information.
- Once you have a variable annuity, you can do a few things. 1. Let it grow back to its original basis (in your case, this would mean investing the $650 in variable annuity, and once it reached $53,000, you could then withdraw it and there would be no taxes, but good luck growing that $650 to $53,000. 2. Cancel the variable annuity and claim a loss (in your case, it would likely be about $52,000). There are multiple ways to claim a loss, some more aggressive than others, and there historically has been debate on how to claim it. However, in 2014 the IRS issued guidance on "proper" way to claim a loss. See my comment in the article on The White Coat Investor from June 24, 2015.
- Feel free to PM with any questions.
The fees = ~$660/year.
I will re-read that blog/comments, but I think my situation is slightly different, as I have been "over-funding" the policy...as is mentioned a few times, there.
Re: Accumulation VUL Questions...
Sorry! I misread your surrender value as your surrender charge! Ignore my numbers, but my other points still apply. I still recommend James Hunt or other resource to help evaluate if you should keep the policy or not.buldogge wrote:
I'm obviously confused...I've paid in $40,800...the current value (after surrender) is $52k...the surrender charge is $650.
The fees = ~$660/year.
I will re-read that blog/comments, but I think my situation is slightly different, as I have been "over-funding" the policy...as is mentioned a few times, there.
Re: Accumulation VUL Questions...
Sorry, that was a bit sarcastic. What caused you to write a $500,000 policy on a child?buldogge wrote:???David Jay wrote:What does this mean? This sounds like insurance salesman language.buldogge wrote:This policy insures my 10yo...
That's how the policy cover page reads.
$500k death benefit...insured is my son...policy holders are my wife and I.
There is no financial loss to insure against. Even if the intent was to fund college, why not write the policy on a wage earner where there is any actual possibility of financial loss?
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Re: Accumulation VUL Questions...
TBH, I have no idea...It is set-up however the FA advised back in '08.David Jay wrote:Sorry, that was a bit sarcastic. What caused you to write a $500,000 policy on a child?buldogge wrote:???David Jay wrote:What does this mean? This sounds like insurance salesman language.buldogge wrote:This policy insures my 10yo...
That's how the policy cover page reads.
$500k death benefit...insured is my son...policy holders are my wife and I.
There is no financial loss to insure against. Even if the intent was to fund college, why not write the policy on a wage earner where there is any actual possibility of financial loss?
Seems it had something to do with him being able to pull an 80% "loan" after 18.
Re: Accumulation VUL Questions...
Anyone have anything to add, or is a James Hunt consultation the best/only option??
TIA
TIA
Re: Accumulation VUL Questions...
I think you will find that there is so much deliberate confusion as well as variation in the various policies, that no ordinary mortal, unless he/she has made a career of it, can totally understand it, even when spending hours studying every nuance in the 50-200 or whatever number of pages in the policy.
So, yes, for an expert opinion you will probably have to pay for it. It is possible you would be advised to keep it at this point, I just don't know.
It might be worth first talking to the Vanguard annuity experts to see what they have to say, and consider whatever bias they may have (I have heard good reports of them, possibly no conflict of interest, no personal knowledge here), although their alternatives may have the best value if a 1035 exchange makes sense because of taxes. I believe they use V low-cost index funds and add a much lower cost fee than your fees + higher cost of funds. I expect this would be some kind of annuity with perhaps no surrender cost.
If this money had been invested in something like Vanguard's Total stock market and/or total international, there would be mostly qualified dividends given off each year which are taxed just like Capital Gains, so they would be very tax-efficient.
So, yes, for an expert opinion you will probably have to pay for it. It is possible you would be advised to keep it at this point, I just don't know.
It might be worth first talking to the Vanguard annuity experts to see what they have to say, and consider whatever bias they may have (I have heard good reports of them, possibly no conflict of interest, no personal knowledge here), although their alternatives may have the best value if a 1035 exchange makes sense because of taxes. I believe they use V low-cost index funds and add a much lower cost fee than your fees + higher cost of funds. I expect this would be some kind of annuity with perhaps no surrender cost.
If this money had been invested in something like Vanguard's Total stock market and/or total international, there would be mostly qualified dividends given off each year which are taxed just like Capital Gains, so they would be very tax-efficient.
-
- Posts: 3589
- Joined: Fri Dec 26, 2014 3:19 pm
Re: Accumulation VUL Questions...
Yes, you are up the $10-12K, but if you had invested it outside of the VUL your tax rate on those gains would have been lower.Right now it appears that I am only out the $600...Sure the $40k might have been able to make more over 8 years, in a different investment...and I'm not sure I understand/know the tax consequences...but...I''m "up" $10-12k...no?
I'm trying to understand the end game for using a VUL to fund college. Usually the sales pitch on permanent insurance policies is that if you need the money for retirement you borrow it, and the loan gets paid back from the death benefit after you die. When you are insuring your child, you don't have the expectation that the loan will get paid back that way, so what would be the plan? Cashing out during a kid's college years often means during the parents' peak earning years, so you expect to pay top tax rates. Maybe the plan is taking a loan for college, then cashing out to repay the loan after retirement? I just don't get what the VUL buys you that is worth paying tax on ordinary income vs. capital gains. I get that the sales person gets a big commission, but not what the policy owner was promised as a benefit.
So maybe a James Hunt consultation would help you decide how cashing out this investment at various times between next week and your son's retirement date would likely affect your taxes. And if you decide to keep this investment in an annuity, maybe Vanguard could help you with investment choices.
- mephistophles
- Posts: 3110
- Joined: Tue Mar 27, 2007 2:34 am
Re: Accumulation VUL Questions...
+++1 ole mephDavid Jay wrote:Sorry, that was a bit sarcastic. What caused you to write a $500,000 policy on a child?buldogge wrote:???David Jay wrote:What does this mean? This sounds like insurance salesman language.buldogge wrote:This policy insures my 10yo...
That's how the policy cover page reads.
$500k death benefit...insured is my son...policy holders are my wife and I.
There is no financial loss to insure against. Even if the intent was to fund college, why not write the policy on a wage earner where there is any actual possibility of financial loss?
Re: Accumulation VUL Questions...
BL wrote:I think you will find that there is so much deliberate confusion as well as variation in the various policies, that no ordinary mortal, unless he/she has made a career of it, can totally understand it, even when spending hours studying every nuance in the 50-200 or whatever number of pages in the policy.
So, yes, for an expert opinion you will probably have to pay for it. It is possible you would be advised to keep it at this point, I just don't know.
It might be worth first talking to the Vanguard annuity experts to see what they have to say, and consider whatever bias they may have (I have heard good reports of them, possibly no conflict of interest, no personal knowledge here), although their alternatives may have the best value if a 1035 exchange makes sense because of taxes. I believe they use V low-cost index funds and add a much lower cost fee than your fees + higher cost of funds. I expect this would be some kind of annuity with perhaps no surrender cost.
If this money had been invested in something like Vanguard's Total stock market and/or total international, there would be mostly qualified dividends given off each year which are taxed just like Capital Gains, so they would be very tax-efficient.
I wish I had an answer to these questions.NotWhoYouThink wrote:Yes, you are up the $10-12K, but if you had invested it outside of the VUL your tax rate on those gains would have been lower.Right now it appears that I am only out the $600...Sure the $40k might have been able to make more over 8 years, in a different investment...and I'm not sure I understand/know the tax consequences...but...I''m "up" $10-12k...no?
I'm trying to understand the end game for using a VUL to fund college. Usually the sales pitch on permanent insurance policies is that if you need the money for retirement you borrow it, and the loan gets paid back from the death benefit after you die. When you are insuring your child, you don't have the expectation that the loan will get paid back that way, so what would be the plan? Cashing out during a kid's college years often means during the parents' peak earning years, so you expect to pay top tax rates. Maybe the plan is taking a loan for college, then cashing out to repay the loan after retirement? I just don't get what the VUL buys you that is worth paying tax on ordinary income vs. capital gains. I get that the sales person gets a big commission, but not what the policy owner was promised as a benefit.
So maybe a James Hunt consultation would help you decide how cashing out this investment at various times between next week and your son's retirement date would likely affect your taxes. And if you decide to keep this investment in an annuity, maybe Vanguard could help you with investment choices.
Obviously, I didn't follow due diligence when this was put in place in '08. At the time, I was fully trusting the FA and didn't ask the right questions.
I will speak to Vanguard Annuities and most likely send the info/enquiry to James Hunt.
TA
Re: Accumulation VUL Questions...
I'm not sure if the policy is worth keeping or surrendering, but I did want to address a couple of things:
1. If you do decide to keep the policy and use it to fund your child's education, then you will want to take "switch at basis" distributions from the policy. Since withdrawals from a life insurance policy come from basis first, those withdrawals are "tax free". Once the basis is exhausted, then you would "switch" over to taking loans, which are also "tax free" (all loans are "tax free"). If you request an inforce illustration, this is exactly what you should request seeing: switch at basis distributions during the college years.
2. People have wondered why the child was the insured, and not the parent. The answer is that the child will have considerably lower cost of insurance charges than one of the parents. I believe the intent is to put as much money into the policy in the early years, then take withdrawals and loans during the education years, while trying to keep the ongoing expenses of the policy as low as possible, and having a child as an insured would reduce the expenses significantly.
3. One thing to know is that it's usually a disaster to let a policy lapse because of an outstanding loan balance. The result will usually be a big tax bill with a small surrender check from the insurance company. Once a policy has a loan balance against it, any new money that you apply towards the policy should repay the loan balance and/or interest, NOT the premium.
1. If you do decide to keep the policy and use it to fund your child's education, then you will want to take "switch at basis" distributions from the policy. Since withdrawals from a life insurance policy come from basis first, those withdrawals are "tax free". Once the basis is exhausted, then you would "switch" over to taking loans, which are also "tax free" (all loans are "tax free"). If you request an inforce illustration, this is exactly what you should request seeing: switch at basis distributions during the college years.
2. People have wondered why the child was the insured, and not the parent. The answer is that the child will have considerably lower cost of insurance charges than one of the parents. I believe the intent is to put as much money into the policy in the early years, then take withdrawals and loans during the education years, while trying to keep the ongoing expenses of the policy as low as possible, and having a child as an insured would reduce the expenses significantly.
3. One thing to know is that it's usually a disaster to let a policy lapse because of an outstanding loan balance. The result will usually be a big tax bill with a small surrender check from the insurance company. Once a policy has a loan balance against it, any new money that you apply towards the policy should repay the loan balance and/or interest, NOT the premium.
Even a stopped clock is right twice a day.
Re: Accumulation VUL Questions...
Thanks for the info.powermega wrote:I'm not sure if the policy is worth keeping or surrendering, but I did want to address a couple of things:
1. If you do decide to keep the policy and use it to fund your child's education, then you will want to take "switch at basis" distributions from the policy. Since withdrawals from a life insurance policy come from basis first, those withdrawals are "tax free". Once the basis is exhausted, then you would "switch" over to taking loans, which are also "tax free" (all loans are "tax free"). If you request an inforce illustration, this is exactly what you should request seeing: switch at basis distributions during the college years.
2. People have wondered why the child was the insured, and not the parent. The answer is that the child will have considerably lower cost of insurance charges than one of the parents. I believe the intent is to put as much money into the policy in the early years, then take withdrawals and loans during the education years, while trying to keep the ongoing expenses of the policy as low as possible, and having a child as an insured would reduce the expenses significantly.
3. One thing to know is that it's usually a disaster to let a policy lapse because of an outstanding loan balance. The result will usually be a big tax bill with a small surrender check from the insurance company. Once a policy has a loan balance against it, any new money that you apply towards the policy should repay the loan balance and/or interest, NOT the premium.
I do believe the age of the insured was a factor, especially since we would be over-funding the policy. The insurance premium is only ~$225/yr, (total charges ~$660) but we fund the policy @ $4800/yr. I pay more than that for a term policy, from the same company.
Re: Accumulation VUL Questions...
In-force Illustration requested, noted switch at basis distributions info. 5-10 days turnaround.
The illustration is needed to consult James Hunt, so needed either way.
Thanks.
The illustration is needed to consult James Hunt, so needed either way.
Thanks.
Last edited by buldogge on Tue Oct 25, 2016 8:31 pm, edited 1 time in total.
Re: Accumulation VUL Questions...
We used James Hunt at http://www.evaluatelifeinsurance.org to evaluate our VUL insurance policy several years ago. He was very helpful, spent over an hour with us on the phone explaining the details of the policy page by page, the pros and cons, how to decipher the insurance "code," made suggestions, then followed up with more thoughts by email, then a written evaluation. About $100 and well worth every penny. He knows a lot about life insurance and can explain it in as much or little detail as you prefer, plus he was cordial and interesting. He actually concluded that our policy was a "valuable" old policy for what we needed (which is not for college).
Here are a few more threads you might want to look at for more information about VULs:
viewtopic.php?f=1&t=147989 - Using a VUL to pay for college-Am I nuts?
viewtopic.php?f=1&t=159235 - Exit Strategy VUL Policy
viewtopic.php?f=1&t=189943 - VUL-help me out of this mess
Here are a few more threads you might want to look at for more information about VULs:
viewtopic.php?f=1&t=147989 - Using a VUL to pay for college-Am I nuts?
viewtopic.php?f=1&t=159235 - Exit Strategy VUL Policy
viewtopic.php?f=1&t=189943 - VUL-help me out of this mess
Re: Accumulation VUL Questions...
Here is what Ole Meph said about VULs in another thread:
viewtopic.php?f=1&t=189943- VUL-Help me out of this messmephistophles wrote:Dear Bogleheads,
I have never encountered a boglehead, or anyone else, who is a good candiate to own VUL for the long term. That product violates most, if not all, of the fundamental boglehead principles that created and continue to serve this forum. Here are just a few to start...
1, Never buy anything that you don't understand completely! VUL is the most complicated life insurance product ever created by the insurance industry. I am a CLU with 45 years in the business and have never met anyone who completely understands the product and its risks. I wrote the chapter on life insurance in Bogleheads Guide to Retirement Planning and I am extremely challenged by the product and how its risks unfold over time.
2. Never mix life insurance and investing. That is exactly what VUL intends to do, but with so much smoke and mirrors that even the brightest client doesn't understand what is happening to his product years down the road. The insurance companies usually discard older VUL products for newer ones, and the agents who sell these are rarely in the business years hence.Chances of getting qualified help or advice from the company at that point is almost zero.
3. Keep it simple. If you need permanent insurance buy straight Universal Life with a guaranteed lifetime premium to age 120 and a guaranteed death benefit. You don't have to manage this product, Buy it, pay the premium, die and it pays off period. Surrender it if no longer needed. Cash valuable is minimal to none and its lower premiums reflect this.
If you need or must have cash value in your product, buy from a company like Northwestern Mutual. You pay more premium for this cash value but the death benefit and premium are guaranteed and you don't have to manage the policy. This is normally only useful for closely held corporations, estate planning for wealthy people, special needs trusts and a few other situations.
4. Costs matter. There are no good VULs only some that not as bad as other, and none better than the products in number 3 above. There are no no-load VULs. A few have no upfront surrender charges and a few even invest in higher quality funds with lower expense ratios. But, they are still highly loaded with myriad charges. Just download the prospectus and read a list of the large number of other charges that still apply. I won't list them here, just read for yourself.
5. Don't bear more risk than necessary. VUL death benefit is not guaranteed by paying a simple, competitive, guaranteed premium. Poor performance, change to higher expense, mortality and other charges, loans and withdrawals can all cause this policy to lapse before death, unless you pay potentially very large chunks of premium and drop ins to keep it in force. This usually happens in the later years of your life. Lapse or surrender and all gains are taxable at normal income tax rates.
6. Minimize taxes. Number 5 takes care of that.
7. Develop a workable plan and stay the course. I cannot imagine any younger boglehead developing a plan that commits to a VUL for numerous decades nor for staying this course as insurance needs change, and often evaporate in the journey through life. Also, can't imagine any boglehead who would buy a new insurance/investment product that took ten to twenty years just to break even.
To summarize, I can't imagine any boglehead who would ever recommend anything different than the principles in action above. I would also suggest not following the insurance recommendations of Larson Financial Services, other non-boglehead financial advisers or newsletters that support non-boglehead principles
Best regards,
ole meph
Re: Accumulation VUL Questions...
Thanks for the additional reading, especially the first link.Miriam2 wrote:We used James Hunt at http://www.evaluatelifeinsurance.org to evaluate our VUL insurance policy several years ago. He was very helpful, spent over an hour with us on the phone explaining the details of the policy page by page, the pros and cons, how to decipher the insurance "code," made suggestions, then followed up with more thoughts by email, then a written evaluation. About $100 and well worth every penny. He knows a lot about life insurance and can explain it in as much or little detail as you prefer, plus he was cordial and interesting. He actually concluded that our policy was a "valuable" old policy for what we needed (which is not for college).
Here are a few more threads you might want to look at for more information about VULs:
viewtopic.php?f=1&t=147989 - Using a VUL to pay for college-Am I nuts?
viewtopic.php?f=1&t=159235 - Exit Strategy VUL Policy
viewtopic.php?f=1&t=189943 - VUL-help me out of this mess
I will consult with Mr. Hunt as soon as I receive the in-force illustration.
TA
Re: Accumulation VUL Questions...
In-Force Illustration received...showing withdrawals in years 17-20 (ages 18-21).
Anything in particular I could post-up to help provide a clear(er) understanding/view of the policy?
TIA
Anything in particular I could post-up to help provide a clear(er) understanding/view of the policy?
TIA
Re: Accumulation VUL Questions...
Oddly, I never received a response from James Hunt, following my initial enquiry.
I guess I'll go "old school" today, and pick up the phone.
I guess I'll go "old school" today, and pick up the phone.