"Term-Like" Universal Life Policy

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powermega
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"Term-Like" Universal Life Policy

Post by powermega »

My wife and I are shopping around for some additional life insurance. We currently have 20 year term policies that are about three years old. We are looking to buy additional 20 year policies to give us a "layer" approach. In the course of doing so, we came across the "Custom Choice UL 20 Year No Lapse" policy from Protective Life Insurance. You can read about the policy here.

Unlike traditional ULs the premium and face guaranteed for a certain period of time. After the initial "term" period, the premiums will remain constant and the face amount will decrease. Also, it seems that the policy is not generating any cash value, that essentially the premiums and interest earned by the insurance company are completely consumed by the charges in the policy.

I'm wary of buying a UL policy instead of a term policy for our insurance need, but at the end of the day if you're paying $x for $y face, and those values remain constant for z number of years, does it really matter? Has anyone bought one of these policies?
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nisiprius
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Re: "Term-Like" Universal Life Policy

Post by nisiprius »

Assume that the insurance company knows more than you do, and that the more complicated the product is,

a) the larger the difference in knowledge is likely to be, and

b) the less likely it is that you can find exactly the same product from any other company, therefore the less likely that you can compare costs.
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powermega
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Re: "Term-Like" Universal Life Policy

Post by powermega »

Thanks for the response nisi. I share your wariness for these kinds of products too, and I believe I'm someone who understands life insurance better than most (because of my job).

A couple of other pieces of information that are relevant: I am 43 years old male in good health. My existing policy with Voya (used to be ING) has the best risk class. With that information, the UL policy I'm talking about is actually one of the cheapest premiums available at term4sale.com. If you look at the fine print, you'll find some of the expected horrible fees and expenses in a UL (ex: 25%, yes 25% premium load). Term policies have their own fees too, which are usually harder to ascertain, and the ability to comparison shop easily helps keep those fees down. Still, at the end of the day, we're talking about $x premium for $y face for z years. It is highly doubtful that we would continue to pay premiums into any policy after 20 years, since our life insurance need would be very low or nonexistant.
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Miriam2
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Re: "Term-Like" Universal Life Policy

Post by Miriam2 »

Doesn't it depend on what you need the life insurance for, why are you buying it?
I have a guaranteed no lapse universal life insurance policy, gUL, with American General, bought from an agent from "term4sale."
BUT, the reason I have the policy is to leave a guaranteed amount of money for a beneficiary, to put into a trust for that person.
Last edited by Miriam2 on Sun Feb 22, 2015 2:59 pm, edited 1 time in total.
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mickeyd
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Re: "Term-Like" Universal Life Policy

Post by mickeyd »

If you look at the fine print, you'll find some of the expected horrible fees and expenses in a UL (ex: 25%, yes 25% premium load). Term policies have their own fees too, which are usually harder to ascertain, and the ability to comparison shop easily helps keep those fees down.
Ask the agent how much commission he will make on the UL policy and how much he will take home on the term policy of the same face value. He will say he does not know. He will be telling you an untruth. Tell him you will wait for a better response. tick...tick...tick
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bluemarlin08
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Re: "Term-Like" Universal Life Policy

Post by bluemarlin08 »

These type policies are often a little less expensive than similar term policies. They perform exactly like a similar twenty year term policy, premium guaranteed for the period and death benefit guaranteed for the period. Commissions are almost identical to term policies. The company doesn't have to reserve as much for these policies so they can price them slightly less. The expenses that have been stated don't apply to the guaranteed part of the policy.
edge
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Re: "Term-Like" Universal Life Policy

Post by edge »

Why don't you ask yourself if you 'need' permanent life insurance? Permanent life insurance is a wealth transfer vehicle for folks who have taxable estate assets.
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Re: "Term-Like" Universal Life Policy

Post by BruDude »

bluemarlin08 wrote:These type policies are often a little less expensive than similar term policies. They perform exactly like a similar twenty year term policy, premium guaranteed for the period and death benefit guaranteed for the period. Commissions are almost identical to term policies. The company doesn't have to reserve as much for these policies so they can price them slightly less. The expenses that have been stated don't apply to the guaranteed part of the policy.
x2

It's effectively just a term policy and commissions to the agent are no different than any other term product. If there is another policy available at the same price I would choose a traditional term product just to have the better conversion option in the event that you ever decide to use it. If it's cheaper than other term policies, I wouldn't hesitate to use it.
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gasdoc
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Re: "Term-Like" Universal Life Policy

Post by gasdoc »

Every financial advisor in the world recommends simple term life insurance except maybe as wealth transfer vehicle. Guarantee your life with term. Do your investing with Vanguard, etc. If it is not term life, you have no idea what the company is doing to reduce the rate or in most cases inflate the rate.
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