What Is Universal Life Vs. Whole Life?
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- Опубликовано: 9 сен 2024
- Universal life was created for living benefits. Whole life is primarily for death. In this video, I'm going to answer the question, "what is universal life vs whole life insurance?". I will teach you some differences that many life insurance agents don't even understand.
To your abundance!
Doug Andrew
Key Moments In This Episode
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00:45 Retirement and resources
02:55 My favorite vehicle
03:38 What are the difference?
06:12 Internal rate of return
08:30 Universal vs Whole life
10:36 In summary
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Doug, I appreciated the presentation even though you have some strong biases and innacurate assumptions.
I own my own firm and have placed over $100Million in term, UL, and Whole Life insurance contracts in the last few years.
Prior to owning my own firm I was an Advanced Planning Attorney at A national bank and also Sr. Advanced Sales Attorney for The brokerage division of a major insurance carrier.
When it comes to cash value accumulation there are planning scenarios calling for both IUL and whole life. It's not a matter of one product being superior to the other, it's a matter of what the scenario calls for.
1. According to the AG-49 guidelines just passed at the beginning of this month you can't illustrate an IUL policy at the 9.2% rate you cited in your example. That industry guideline was specifically created to stop agents from selling IUL with average assumed rates the policy probably will not achieve.
2. Please tell me which IUL contract from an A-rated or better carrier has a GUARANTEED cap of the 15-17% you referenced in May of 2023? If you can't find guaranteed, show me the carrier that had an average cap rate over the last 23 years of 15-17% (the carrier must also have a participation rate of 100%)
3. You speak about WL in general without acknowledging there are whole life contracts engineered $1 under the MEC limit with a minimum of death benefit specifically designed for cash accumulation and distribution.
I just ran 2 illustrations for a client last week who had 50k a year to put towards a life insurance contract for cash accumulation and distribution.
They were the Securian Eclipse Accumulator IUL max funded and illustrated a current AG-49 allowed assumptive rate and the MassMutual 15-pay WL.
Results are that after 15 years IUL illustrates $1,057,000
WL illustrates $945,000
Which reflects that the IUL does have slightly more upside potential if the markets cooperate, but historically the WL policy illustrated at current dividend rates has a higher likelihood of reaching what is illustrated. The IUL carriers can and have manipulated their participation rates, their cap rates, and mortality charges such that there is not very much certainty.
So if I have a client who is willing to accept market risk and the risk that cap rates are lowered and has a horizon greater than 5 years the IUL is a good choice.
For clients who like the predictability of dividends and guarantees that cash value will always grow every year (No zero is your hero) the Whole Life would be the better option.
I also noticed that you've manipulated your challenge to start historical market returns in 1995 when there were 3 straight years of double-digit growth rather than 2000 where there was 3 straight years of negative market returns or zero growth in the IUL. Start your challenge in 2000 and see how the IUL holds up historically.
Whole life is also nice to access funds in retirement if you're using it instead of an IRA or brokerage account for cash flow when markets are performing negatively. (Like last year and this year) because whole Life cash value accumulations are non-correlated to equity markets, they provide an excellent tax advantaged source of funds when you don't want to realize losses by taking equity distributions when the market is down.
It's not a linear question of which type of policy is better, it's which is better for a given fact pattern considering client's goals and risk tolerance?
At any rate, enjoyed the content and discussion. I'm sure only the hardiest of insurance nerds made it this far😊
Best,
David C. Phillips J.D., CLU
I like free speech and press. I love the bill of rights. Thank you brother for your comment 😂
Very helpful
Wow! Good to know!❤❤
Thank you this video almost felt demonizing to Whole Life policies, when it’s exactly like you said, they both are designed for different purposes and circumstances.
Nerd reporting for duty here, Sir! ❤❤❤❤
Do you have policies that are 20 years in and performing as well as illustrated or better?
Where is EF Hutton now? VUL and IUL have only been around for 30-40 years compared to WL 200 years. I find IULs to be complex high maintenance and not for the average Joe. Most people don’t want insurance that shifts the risk away from the insurance company to the client. That’s what 401ks and the stock market do. Insurance needs to remove risk not expose you to risk.
I believe IUL''s are good. the main thing is to do your research and interview more than one agent. Make sure you are getting the lowest death benefit. It has to be structured correctly and that should help you a lot, also look into IULs for children.
You have a contactorial agreement with the insurance company to never lose money with a index product.. IRS code 7702.
@@treygodschild8883 it is incorrect to say that you have contractual obligation to not lose money with an indexed life insurance product. If there is a negative fund performance such that $0 are credited to the policy and the insurance company raises the mortality cost, you will see cash values decline in an IUL contract. This can and has happened.
Thanks for this!
@@davidphillips1845the COI is grandfathered into the contract but other fees can change as well as par rates and caps...etc.
Thank you!
You bet! For more helpful information visit the rest of our channel!
Great information thanks
VERY GOOD & INTERESTING INFORMATION VIDEO MR. ANDREW
Thank you!
Thanx. You really explained that to me well.
Glad it was helpful!
Thank you so much god made this for us 💕🙌🙏🙌🙏🙌🙏
Im so glad I watched this before I got a whole life policy now I am getting a universal policy and I can put into it as much as i need or as little better than a 401k thats for sure
what about IUL vs a roth 401k?
Thanks Man 👍
Thank you!
Hello, on a UL policy with a death benefit of $100g would it be wise to go with a guaranteed assumptions with a fixed rate of 1% or a non-guaranteed assumptions with a fixed rate of 3.25%? Also, UL ins. Has a compound interest rate? Thanks!
These products are always illustrated criminally and don't accurately represent the rising cost of insurance or negative market returns.
So, we can use universal life insurance for living income? We can take from it?
Great question! If you have a properly structured maximum funded IUL, ie. a Laser Fund, then you can really control whenever you want to start accessing the living benefits. Ideally you want to maximum fund the policy first, but once that is achieved, you can start anytime. For more information check out the rest of the channel or head over to our website to consult with an IUL Professional. 3dimensionalwealth.com/getstarted
@missedfortune Thank you! Also, when we put money into it does it have to be alot? Because I'm not rich and if I put 1,000 or 3,000 in is that good to start? Kinda what I can afford right now?
Whole life, if properly designed, serves very well as a safe-cash stash, not just death benefit. Kind of disturbed by blanket statements like this @ 0.05
Are you using Cash flow banking method ??
Wow wow wow wow wow
thank u for the beautify info. How much are you netting in the first 5-10 years?
I replace 100% of every IUL I come across!! Absolutely one of the worst products for the consumer!!
What if the individual doesn't qualify for an IUL because of medical conditions?
The owner of the IUL gets all the tax-free growth and income. Many people and entities own IUL on surrogate insureds. You can own an IUL on your spouse, adult children, parents, business partners, etc. B.O.L.I. Is bank owned life insured. C.O.L.I. is Corporate Owned life insurance. They own policies on their key people.
I am trying to contract index what do you recommend me .
Watching your own playlists showing examples of gains, you aren’t showing the “internal rate of return”. Why is that?
I'm confused. How were they calculating the rate of return at 8% originally?
Guaranteed rate of return + dividends
God that was amazing information I kill for. Thank you sir. Much appreciated ❤
What are the companies offer 1 percent or less in taxes if I want to take some money out? Just like when you said if I have 8 and I will get 7 out.. I’m sorry if I sound confusing…
Hey there, an IUL Professional we work with can help you with that. You can setup a time to speak directly to an IUL Professional we work with here: www.3dimensionalwealth.com/getstarted
Good day sir, and thank you for the wonderful information.
I’m 33 years. Owner operator/. Truck driver
What the best policy to get to retire in 5-10 years
And take the funds and Start investing it into real estate in 3-5 years from now ??
Any suggestions please and thank you.
Single no kids no bills. Live in the truck. Goal to retire my parents in 10 years or sooner.
It would be best to have one of the IUL Specialists take a look at your current situation and show you some options custom to your circumstances. Here is the link to register: www.3dimensionalwealth.com/getstarted
Get Whole life and some accidental. Keep it affordable.
Northwest mutual is trying to get me to open an account for VULP is it worth it. Im 30, or is it not worth it.
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Can you compare fees / guarantees / risk in an IUL vs WL insurance policy?
Your videos are great, Doug!! Very informative and love your personality :) I have a question for you (or if anyone on this thread can answer it) as I am relatively new to the industry... I understand and see all the value in an IUL, but from what I've learned the money taken out in retirement as withdrawals is technically considered a loan. Hypothetically speaking, what would happen to the loan if during retirement at some point my debt becomes greater than the cost of my actual investments? Let's say the market doesn't end positive for a couple of years (even if I'm not losing since my floor is 0%), is it possible to end up defaulting on my loan debt? And if my debt becomes greater than my initial principal/capital gains, would I lose my policy or be blocked from taking more withdrawals out? I hope my question makes sense, thanks in advance!🙏
Hi, I am very new as well. I believe if you watch the wealth protection lady that may help you. I have been doing a lot of research on IUL's myself. Good luck.
If you max out on the cash value through loans, then you can still take out dividends if you are with the right company. Your death benefit upon your passing will subtract the loans and remainder if any will pass to your heirs. The problem with an IUL that isn’t structured properly is the cost of insurance will eat up your CV and you will not be able to take as much of a loan for retirement. You have to overfund the policy early on and throughout to compensate for this feature.
@@mgallegos4708 Thank you!!
@@nacquiamills8791 Thanks!!
Great question Alexandra considering the risk with any product.
1. In a scenario where you borrow near the maximum allowable amount with an interest rate that is higher than that credited to your cash value it is possible that the carrier requires you to pay additional premium or face policy lapse.
2. Remember the loans are considered an advance against future death benefit, so if the policy lapses the outstanding loans and interest are now taxable income.
3. Contrary to common belief it is possible to have a decline in cash value in an IUL policy if negative market returns are coupled with an increase in costs of insurance.
To avoid the ugly scenario of a potential policy lapse and tax consequences, it is best to leave a cushion of about 25% or so of CV in the policy so that negative returns don't place the policy at risk of lapse requiring additional lump sum premiums.
Good Luck!
David C. Phillips J.D. CLU
You have to send in a shit load of money to able to do this. Poor people like me can only afford 3000 a year which wouldn’t make much of a difference
Can you borrow on whole life?
Yes you borrow your own money and have to pay interest to the insurance company.
you said you get 10% and net 9%, the 1% standards for your cost of insurance (Based on LASER FUND--MAX FUND IUL)? That is 1% come from? But at the beginning of the policy, even you max fund, your cost of insurance is not 1%.
The cost of my policy in year ten+ is not 1%, but may only be .1%. So over a ten+ year period of time, in order for your money to reach it balance by year ten+, it would have to have been earning a return of 9%, but I have averaged 10%. So that tells me my average fee from day one was 1%.
@@missedfortune I see. the 1% is by long term and get back to calculated. Thank you.
@@missedfortune How much are you netting in the first 5-10 years?
And IuL has cap, the same amount of death benefit, IUL has higher cost in long term. It is impossible for IUl to get 9% return.
so how do i get an IUL insurance policy online?
You want to make sure you're talking with someone who understand how to structure the IUL properly. You can setup a time to speak directly to an IUL Professional we work with here: www.3dimensionalwealth.com/getstarted
Let me understand this - you want me to buy life insurance and then pay interest on borrowing my own money?
I think you are missing the main point. You continue to earn interest on your money. I have seen many policies this year alone where the policy holder had policy loans at 4%, but that same money earned 10%+ in the policy. So for example, you take a loan for $100,000 at 4%, but that allows that $100,000 to stay in your account earning 10%+ this last year. So although, you accessed $100k, you still made a net of $6,000 on it!
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@@missedfortune that's the pitch of Term Life insurance agents. LOL!
You pay taxes on the interest earned not on the principle
@@missedfortuneI wish I had known this 30 years ago. And I certainly don't have $500.000 to fund a policy. At one time I had close to that but also had a bad financial advisor!
How do you account for the taxation due from one’s estate on the policy loans and the earnings when the policy terminates at one’s death and all the interest that was “tax free” is imputed to the policy owner (or their estate) as income?
Universal life???? Are you f*cking serious ??? Are you gonna sell me some magic beans too ? What is this 1989 ???