Should I stop paying into my IUL policy?

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Topic Author
Eurookat
Posts: 364
Joined: Sat Nov 29, 2014 12:44 pm

Should I stop paying into my IUL policy?

Post by Eurookat »

A year ago I purchased multiple life insurance from a broker. I have a health condition that doesn't have any known cure. I'm not going to die tomorrow or even a month or year from now, but it can make life interesting for my family if I had to be hospitalize. ANyways, the broker managed to get me a couple of quotes and they were high considering my health condition. I have the following policies.

- 700k 30yr term policy started at Age 34 (I'm 35 now)
- 500k IUL policy through Lincoln Financial.

I know what the general consensus is with IUL. However, considering my situation, I wanted to protect my wife and daughter as much as I could. When I was going through the application process, I was thinking long term and wanted to cover myself in the event I outlive the term insurance. I know I wouldn't be able to get a new policy when I'm in the 60s. I understand by that age, I wouldn't have a need for life insurance but I don't have a problem leaving money for my kids. I have a couple of questions. I called my broker but he wants to meet me in person and I'm sure he'll talk me into contributing as much money as I can each quarter. I would like to know if any other bogleheads have experience with IUL.

1 - I've dumped $2500 into the policy thus far and I found out the hard way when I saw how much went towards fees! My broker didn't mention this to me, quite pissed about this. My question, if I walk away from the policy, I assume I would lose the $2500 and nothing more.

2 - I recall when I called LFG about the "missing money" (when I learned about the fees), the CS rep mentioned there's a minimum payment of roughly $240 each quarter. I'll call LFG again but does anyone know if I continue to pay that amount each quarter, will my policy continue to be active? At this point I dont care for the potential investment amount, I really don't want to lose the policy.

3 - I wish I could find the article but I read an article about things they don't tell you with IUL. One of them being the fees as the policy gets older. It's the reason why IUL shouldn't be used as an investment option but I was definitely duped into thinking so.
dhodson
Posts: 4117
Joined: Mon May 24, 2010 3:03 pm

Re: Should I stop paying into my IUL policy?

Post by dhodson »

You are not going to be happy. There is no free lunch with insurance.

1. Yes you can't lose more than you have paid.
2. Ask for an in force illustration and look at the guaranteed amounts to keep in force.
3. universal life has increasing insurance cost with age.

If you don't fund the investment piece it will definitely crash over time with those premiums.

Good luck.
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White Coat Investor
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Re: Should I stop paying into my IUL policy?

Post by White Coat Investor »

sdotsen wrote:A year ago I purchased multiple life insurance from a broker. I have a health condition that doesn't have any known cure. I'm not going to die tomorrow or even a month or year from now, but it can make life interesting for my family if I had to be hospitalize. ANyways, the broker managed to get me a couple of quotes and they were high considering my health condition. I have the following policies.

- 700k 30yr term policy started at Age 34 (I'm 35 now)
- 500k IUL policy through Lincoln Financial.

I know what the general consensus is with IUL. However, considering my situation, I wanted to protect my wife and daughter as much as I could. When I was going through the application process, I was thinking long term and wanted to cover myself in the event I outlive the term insurance. I know I wouldn't be able to get a new policy when I'm in the 60s. I understand by that age, I wouldn't have a need for life insurance but I don't have a problem leaving money for my kids. I have a couple of questions. I called my broker but he wants to meet me in person and I'm sure he'll talk me into contributing as much money as I can each quarter. I would like to know if any other bogleheads have experience with IUL.

1 - I've dumped $2500 into the policy thus far and I found out the hard way when I saw how much went towards fees! My broker didn't mention this to me, quite pissed about this. My question, if I walk away from the policy, I assume I would lose the $2500 and nothing more.

2 - I recall when I called LFG about the "missing money" (when I learned about the fees), the CS rep mentioned there's a minimum payment of roughly $240 each quarter. I'll call LFG again but does anyone know if I continue to pay that amount each quarter, will my policy continue to be active? At this point I dont care for the potential investment amount, I really don't want to lose the policy.

3 - I wish I could find the article but I read an article about things they don't tell you with IUL. One of them being the fees as the policy gets older. It's the reason why IUL shouldn't be used as an investment option but I was definitely duped into thinking so.
How bad can your "health condition with no known cure" be if they'll sell you life insurance and you're worried you'll outlive an insurance policy that goes until you're 64? I guess I'm not seeing a big need for you to have a permanent life insurance policy. Will not be able to be financially independent by 64 for some reason?

I'm also very surprised you didn't know there were tons of fees with IUL or that your return the first 5-10 years would be negative. That's pretty much par for the course with these types of policies.

It's unclear to me why you're trying to keep the policy since you seem to dislike it very much. Did you buy it before the diagnosis? Why not just buy a big fat term policy and dump the IUL? $2500 is a pretty cheap lesson as these things go. Lots of people lose tens or even hundreds of thousands making the same mistake.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Topic Author
Eurookat
Posts: 364
Joined: Sat Nov 29, 2014 12:44 pm

Re: Should I stop paying into my IUL policy?

Post by Eurookat »

EmergDoc wrote: How bad can your "health condition with no known cure" be if they'll sell you life insurance and you're worried you'll outlive an insurance policy that goes until you're 64? I guess I'm not seeing a big need for you to have a permanent life insurance policy. Will not be able to be financially independent by 64 for some reason?

I'm also very surprised you didn't know there were tons of fees with IUL or that your return the first 5-10 years would be negative. That's pretty much par for the course with these types of policies.

It's unclear to me why you're trying to keep the policy since you seem to dislike it very much. Did you buy it before the diagnosis? Why not just buy a big fat term policy and dump the IUL? $2500 is a pretty cheap lesson as these things go. Lots of people lose tens or even hundreds of thousands making the same mistake.
There isn't a cure but if it does get worse, I would need to be put on medication. Worst case scenario, I would need a transplant.

So my wife doesn't work FT anymore since our daughter was born. The most money I was able to secure for a term was 700k, said the financial advisor I used. I wanted to be over a million just so that my wife and daughter would be ok if I were to pass away. I realize if I live to 64, we do have our 401ks and IRAs so we still have that.

When I got the IUL, I wasn't thinking about my IRA/401k. I guess I was just being "greedy", wanting to make sure my daughter can pay off her loans. Who knows what college cost will be in 20 years.
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BL
Posts: 9874
Joined: Sun Mar 01, 2009 1:28 pm

Re: Should I stop paying into my IUL policy?

Post by BL »

Be sure to check term4sale.com for information and maybe that will help you find an independent insurance broker to look for another term insurance policy. Since you were able to get one last year, it seems quite likely you can get one now. Maybe do it before you get out of this policy. Also check what a policy similar to your current term would cost, just in case that is overpriced as well. Anyway I would not trust anything your financial adviser says since he sold you this policy. He is probably costing you money in other ways as well.

In Googling Universal life insurance, I found this article that warns of problems that can arise when you get older and cost of insurance increases enough that policies can crash unless you come up with lots of cash to keep it going:
http://www.forbes.com/sites/investor/20 ... cyholders/

So I would guess that nothing will be solved by hanging onto it, and just cutting the payment may mean that it will crash even sooner. My vote is to get rid of it (and the adviser/broker!)

I believe dhodson has studied this more than most of us and I would definitely listen to him!
bluemarlin08
Posts: 1561
Joined: Wed Aug 29, 2007 12:18 pm

Re: Should I stop paying into my IUL policy?

Post by bluemarlin08 »

You should have a good independent agent review this. I can tell you the IUL was a bad recommendation, way to many different variables. If one needs a long term death benefit it is hard to beat Guaranteed Universal Life.
dhodson
Posts: 4117
Joined: Mon May 24, 2010 3:03 pm

Re: Should I stop paying into my IUL policy?

Post by dhodson »

Which of course he doesn't need.

You will notice the premium is a lot higher for that if you bother to look. The reason being is the rate can't be jacked up on you later on. It also won't have any value if you ever surrender it.
tj
Posts: 9317
Joined: Wed Dec 23, 2009 11:10 pm

Re: Should I stop paying into my IUL policy?

Post by tj »

The most money I was able to secure for a term was 700k, said the financial advisor I used. I wanted to be over a million just so that my wife and daughter would be ok if I were to pass away. I realize if I live to 64, we do have our 401ks and IRAs so we still have that.

This sounds incredibly shady. If they would insure you for 700k, it makes no sense why they wouldnt insure you for 1 million.
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