Pacific Life Index Universal Life Insurance

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PinkPonies777
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Pacific Life Index Universal Life Insurance

Post by PinkPonies777 » Sun Jun 09, 2019 3:43 pm

Is anyone familiar with the Pacific Life Index Universal Life (IUL) Insurance? This is the example I was given. If I paid in 50K/year for 5 years then in the 11th year, I could draw 33K per year plus if I died I'd have a lump sum go to my heirs. So I'd put in 250K to draw 33K per year until I died and my heirs would receive a lump sum.

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Nate79
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Re: Pacific Life Index Universal Life Insurance

Post by Nate79 » Sun Jun 09, 2019 5:18 pm

I surely hope you haven't bought this trash yet right? Toxic garbage. You can find tons of threads on the joys of indexed universal life.

skepticalobserver
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Re: Pacific Life Index Universal Life Insurance

Post by skepticalobserver » Sun Jun 09, 2019 5:30 pm

Check out these links from The White Coat Investor and decide for yourself:

https://www.whitecoatinvestor.com/tag/iul/

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Stinky
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Re: Pacific Life Index Universal Life Insurance

Post by Stinky » Sun Jun 09, 2019 6:43 pm

If something sounds too good to be true, it generally IS too good to be true. This is no exception.

Please, please don’t buy indexed universal life.
It's a GREAT day to be alive - Travis Tritt

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Kenkat
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Re: Pacific Life Index Universal Life Insurance

Post by Kenkat » Sun Jun 09, 2019 7:42 pm

Be aware that the example that was quoted was a sales illustration containing certain assumptions that may or may not be correct - i.e., it is not guaranteed that you can put in $250k and receive $33k a year for life. If the assumptions don’t pan out, the policy could run out of money and lapse at some point in the future.

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David Jay
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Re: Pacific Life Index Universal Life Insurance

Post by David Jay » Sun Jun 09, 2019 8:28 pm

Pink:

Welcome to the forum.

IUL policies are high cost, you can get much better performance from owning the same underlying index without the Life Insurance wrapper. An IUL can occasionally make sense for individuals in very high tax brackets, the link above to White Coat Investor (he is a physician) is a great resource.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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PinkPonies777
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Re: Pacific Life Index Universal Life Insurance

Post by PinkPonies777 » Sun Jun 09, 2019 11:55 pm

Thank you for the White Coat Investor link. I've read several of his articles and doing more research.

skepticalobserver
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Re: Pacific Life Index Universal Life Insurance

Post by skepticalobserver » Mon Jun 10, 2019 6:23 am

PinkPonies777 wrote:
Sun Jun 09, 2019 11:55 pm
the White Coat Investor link. I've read several of his articles and doing more research.
Presciently, this was posted today by TWCI, "10 Reasons People Regret Buying Whole Life Insurance ."
https://www.whitecoatinvestor.com/whole ... e-regrets/

ncbill
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Re: Pacific Life Index Universal Life Insurance

Post by ncbill » Mon Jun 10, 2019 9:02 am

Universal life policies are worse than plain-vanilla whole life policies.

With universal the premium for the insurance is recalculated every year (as with annually renewable term)

So if the insured lives long enough large sums of money must be added so the policy stays in effect.

The illustration the salesperson shows will show policy earnings paying for the increasing cost of insurance.

But that never happens in reality...the prospective buyer should only consider the guaranteed projection.

I've had two umbrella policies "blow up" because of the above once the insured (not me) hit their 70s.
(didn't purchase them but got stuck paying for them)

mchampse
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Re: Pacific Life Index Universal Life Insurance

Post by mchampse » Mon Jun 10, 2019 9:18 pm

If the insurance companies thought that the U/L policy illustrations were actually likely, they would sell them as guaranteed policies.

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Stinky
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Re: Pacific Life Index Universal Life Insurance

Post by Stinky » Tue Jun 11, 2019 6:24 am

mchampse wrote:
Mon Jun 10, 2019 9:18 pm
If the insurance companies thought that the U/L policy illustrations were actually likely, they would sell them as guaranteed policies.
Three reasons life insurance companies can't / won't guarantee the interest rates that they use in policy illustrations:

1 - No rational insurer would make guarantees for a very long period of time (in some cases, 50+ years) on investments that they currently have. There's nothing that an insurance company can invest in that is that "long".

2 - If the insurer can't make very long guarantees on assets they currently possess, they certainly can't make the same guarantees on assets that they will be newly investing in the future. Those assets will be generated from future premium payments. See #1 above.

3 - If an insurer was stupid enough to ignore #1 and/or #2 above, the state regulator would require the insurer to set up extremely high reserves. This would punish the return of the insurer, and make the UL product massively unprofitable.

So ---- expect to see illustrations of IUL, UL, and whole life to contain a lot of "non-guaranteed" elements.
It's a GREAT day to be alive - Travis Tritt

mchampse
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Re: Pacific Life Index Universal Life Insurance

Post by mchampse » Tue Jun 11, 2019 11:35 am

Stinky wrote:
Tue Jun 11, 2019 6:24 am
mchampse wrote:
Mon Jun 10, 2019 9:18 pm
If the insurance companies thought that the U/L policy illustrations were actually likely, they would sell them as guaranteed policies.
Three reasons life insurance companies can't / won't guarantee the interest rates that they use in policy illustrations:

1 - No rational insurer would make guarantees for a very long period of time (in some cases, 50+ years) on investments that they currently have. There's nothing that an insurance company can invest in that is that "long".

2 - If the insurer can't make very long guarantees on assets they currently possess, they certainly can't make the same guarantees on assets that they will be newly investing in the future. Those assets will be generated from future premium payments. See #1 above.

3 - If an insurer was stupid enough to ignore #1 and/or #2 above, the state regulator would require the insurer to set up extremely high reserves. This would punish the return of the insurer, and make the UL product massively unprofitable.

So ---- expect to see illustrations of IUL, UL, and whole life to contain a lot of "non-guaranteed" elements.
Insurers effectively make those guarantees on term and non-participating whole life insurance. The premium calculations include assumptions on future investment returns.

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Stinky
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Re: Pacific Life Index Universal Life Insurance

Post by Stinky » Tue Jun 11, 2019 1:20 pm

mchampse wrote:
Tue Jun 11, 2019 11:35 am
Stinky wrote:
Tue Jun 11, 2019 6:24 am
mchampse wrote:
Mon Jun 10, 2019 9:18 pm
If the insurance companies thought that the U/L policy illustrations were actually likely, they would sell them as guaranteed policies.
Three reasons life insurance companies can't / won't guarantee the interest rates that they use in policy illustrations:

1 - No rational insurer would make guarantees for a very long period of time (in some cases, 50+ years) on investments that they currently have. There's nothing that an insurance company can invest in that is that "long".

2 - If the insurer can't make very long guarantees on assets they currently possess, they certainly can't make the same guarantees on assets that they will be newly investing in the future. Those assets will be generated from future premium payments. See #1 above.

3 - If an insurer was stupid enough to ignore #1 and/or #2 above, the state regulator would require the insurer to set up extremely high reserves. This would punish the return of the insurer, and make the UL product massively unprofitable.

So ---- expect to see illustrations of IUL, UL, and whole life to contain a lot of "non-guaranteed" elements.
Insurers effectively make those guarantees on term and non-participating whole life insurance. The premium calculations include assumptions on future investment returns.
Agreed that level term and non-par whole life have premium guarantees.

On level term, the “investment”’component for the insurance company is very nominal, because level term doesn’t build up very large policy reserves. So insurers can be conservative on investment returns without hurting the product pricing.

On non-par whole life, the product is almost never as competitive as par whole life, at least when dividends are considered. The reasons I mentioned above are the reasons that the assumed investment returns can’t be very aggressive for non-par whole life pricing.
It's a GREAT day to be alive - Travis Tritt

mchampse
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Re: Pacific Life Index Universal Life Insurance

Post by mchampse » Tue Jun 11, 2019 1:34 pm

Stinky wrote:
Tue Jun 11, 2019 1:20 pm
mchampse wrote:
Tue Jun 11, 2019 11:35 am
Stinky wrote:
Tue Jun 11, 2019 6:24 am
mchampse wrote:
Mon Jun 10, 2019 9:18 pm
If the insurance companies thought that the U/L policy illustrations were actually likely, they would sell them as guaranteed policies.
Three reasons life insurance companies can't / won't guarantee the interest rates that they use in policy illustrations:

1 - No rational insurer would make guarantees for a very long period of time (in some cases, 50+ years) on investments that they currently have. There's nothing that an insurance company can invest in that is that "long".

2 - If the insurer can't make very long guarantees on assets they currently possess, they certainly can't make the same guarantees on assets that they will be newly investing in the future. Those assets will be generated from future premium payments. See #1 above.

3 - If an insurer was stupid enough to ignore #1 and/or #2 above, the state regulator would require the insurer to set up extremely high reserves. This would punish the return of the insurer, and make the UL product massively unprofitable.

So ---- expect to see illustrations of IUL, UL, and whole life to contain a lot of "non-guaranteed" elements.
Insurers effectively make those guarantees on term and non-participating whole life insurance. The premium calculations include assumptions on future investment returns.
Agreed that level term and non-par whole life have premium guarantees.

On level term, the “investment”’component for the insurance company is very nominal, because level term doesn’t build up very large policy reserves. So insurers can be conservative on investment returns without hurting the product pricing.

On non-par whole life, the product is almost never as competitive as par whole life, at least when dividends are considered. The reasons I mentioned above are the reasons that the assumed investment returns can’t be very aggressive for non-par whole life pricing.
I was an actuary a long time ago. I was actually pretty surprised at how high the investment returns that we forecasted. It’s a competitive market and if you model very conservative returns, another company will beat you on price. A 20 or 30 year term policy still requires you to model returns for 20 or 30 years. And most of those products are renewable, so you have to model for until the person ages out of being able to renew.

I would never purchase a par policy. You are getting insurance to reduce risk, not to take more of it on. That said, I do remember going over the files of some long time policyholders who were getting 6x dividends versus what they were paying in premiums.

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PinkPonies777
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Re: Pacific Life Index Universal Life Insurance

Post by PinkPonies777 » Fri Jun 14, 2019 9:59 am

Thanks everyone for the good advice. The Index Universal Life (IUL) is a tough cookie to figure out. Some confuse it with Life Insurance and it is but it is another breed. I'm still researching. White Coat is not for the IUL but some of the comments on his blog are in favor of this vehicle. Thanks again for the input.

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Stinky
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Re: Pacific Life Index Universal Life Insurance

Post by Stinky » Fri Jun 14, 2019 10:18 am

PinkPonies777 wrote:
Fri Jun 14, 2019 9:59 am
Thanks everyone for the good advice. The Index Universal Life (IUL) is a tough cookie to figure out. Some confuse it with Life Insurance and it is but it is another breed. I'm still researching. White Coat is not for the IUL but some of the comments on his blog are in favor of this vehicle. Thanks again for the input.
White Coat is not for IUL. And he’s right.

Those positive comments about IUL are mostly from a life insurance salesman. He makes a huge commission when he sells IUL - somewhere between 50% and 100% of first year premium. His advice is obviously conflicted.

Believe WCI. Don’t buy IUL.
It's a GREAT day to be alive - Travis Tritt

lostdog
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Re: Pacific Life Index Universal Life Insurance

Post by lostdog » Fri Jun 14, 2019 10:37 am

Once you tune out the salesman and start crunching the numbers, you'll realize it's garbage. It was created to line the pockets of the salesman.
I don't invest looking in the rear view mirror and I know absolutely nothing about the future.

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