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 Posted: Thu Nov 26, 2009 1:16 am Post subject: USAA Life Insurance |
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| Does anyone have Life/Universal Life through USAA? If 'you' do, can you tell me your experiences with it? Do you think they are a 'positive' or 'negative' comapny to work with? Thanks. |
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sdchargersfan
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| Posted: Thu Nov 26, 2009 3:22 am Post subject: |
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| USAA is a great company with competitive rates, but their underwriting can be much more difficult than other companies. If you're in perfect health, the rates are top notch. If you are not in perfect health, you might be better off elsewhere. |
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dgoldenz
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steven
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| Posted: Fri Nov 27, 2009 10:19 am Post subject: insurance |
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| Thanks for the replies. I haven't REALLY looked into their rates. I'm just assuming since USAA is geared more toward the Military that their rates would be pretty good. Thanks for the link. |
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sdchargersfan
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| Posted: Mon Nov 30, 2009 6:19 pm Post subject: |
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USAA is an excellent company. But that's not the first question you should be asking.
What is your age and why do you think you need Universal Life? Your situation -- debt, mortgage, need for survivor income, education funding for children -- are reasons for purchasing insurance. If you are not married, under age 30, and have no dependents, you probably need to save more for retirement than pay more for life insurance.
If you're a California resident, I'll be happy to discuss your situation privately and offer you the best advice based on your actual needs. That's where the discussion must begin. Not with what company or what product.
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MaxHerr
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| Posted: Mon Nov 30, 2009 10:08 pm Post subject: |
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Max has a very good point. everyones insurance needs, particulalrly life insurance are as individual as they are.
If you have no debts, no children and no spouse -you may not need any life insurance. But if you do have other people you want to provide something for then you need to give some thought to exactly what the're likely to need once you're gone and plan accordingly.
consider loss of you income indefinitely, and outstanding debts (mortgage primarily but any other loans or debts as well), annual living costs, educational costs for any kids etc.
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heidrek
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| Posted: Mon Nov 30, 2009 10:12 pm Post subject: |
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| I could be wrong, but I don't think USAA has a no-lapse universal life policy either. |
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dgoldenz
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| Posted: Tue Dec 01, 2009 6:57 pm Post subject: |
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I just gotta throw in my 2c worth on no-lapse guarantees, because they bug the daylights out of me.
What is it about a life insurance policy that it needs a no-lapse guarantee? (Don't for a minute think I know nothing about UL.) Is it an admission that the product won't perform unless certain "unspoken" things occur.
Most people believe, and rightly so, that life insurance is a simple concept: "I pay, I die, You pay." Until they get involved in a UL policy and pay only minimum premiums based on an agent's hypothetical illustration showing a straight line 6 or 8 percent ROP. Hogwash!
I've never seen a UL policy perform properly at the minimum premium level, and the shock that some folks get when they receive that lapse notice and the need to start sending $000s in future monthly premiums is hurtful to me. And then the attitude that the insurers sometimes take is similarly appalling.
I tried to convince one company to offer a WL policy with a new current age premium but no new underwriting in exchange for the $35,000+ in premiums the 76 year old insured had paid in the past 17 or 18 years, instead of asking him to now pay over $10,000 per year, according to their in-force illustration, just to keep his $100,000 policy alive to age 90 ($150,000+ in future premiums for a $100,000 benefit -- no one is that nuts). They refused. So the insured ends up with no cash value and no insurance.
I've dealt with other carriers who never even blinked, and took the cash flow. They had already made enough in profit on the first contract that the eventual payment of the death claim on a newer contract was no big deal. And there was no commission to me in the exchange.
But is this a reason to pay EXTRA money to the insurer for their product that is designed not to perform at the premium level the insured is sold the policy? I think not.
I only recommend UL and its variants to persons who have the financial means to pay far more than just the minimum premium. The agency I used to work for told its corporate clients that they were required to pay the maximum annual premium allowed under the 7-pay test. Why? Because it was in their best long-term interest. And those policies never found themselves in trouble unless the owner borrowed too heavily from the cash value too early, which was their prerogative, even though we often recommended not to do so.
When we merged with our largest competitor just a few years ago, they wanted to know how we got our clients to pay those huge premiums. And we told them the same thing . . . that we don't recommend or do anything other than what's in the client's best interest (with integrity like that, it was a great company to work for.)
So, while perhaps important, I really dislike no-lapse guarantees. I always point them out to clients if I'm working on a replacement transaction. Because the client usually has no idea why it's there or what it means. And that's a different discussion.
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MaxHerr
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| Posted: Tue Dec 01, 2009 7:52 pm Post subject: |
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UL with a no-lapse guarantee is very easy to understand. It is the equivalent of life-time term insurance. Pay the premium and the insurance is guaranteed to last until death. Don't pay the premium and the policy will lapse.
At older ages, these make much more sense than Whole Life.
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fajsfklla
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| Posted: Wed Dec 02, 2009 6:54 am Post subject: |
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Yes . . . of course I know that. But the underlying premise of term insurance is that you DON'T need life insurance your whole life. It's way too expensive past about age 65-75. If a person genuinely needs life insurance beyond that point, they need a cash value policy. But not one that can implode, by design, even if the premiums are being paid as planned.
My point is if it is "very easy to understand it" why isn't the policy designed in such a way not to need it? And if a no lapse guarantee is so important, why isn't it a standard provision, at no cost to the insured? It's just another dodge by insurers and agents instead of laying all the cards on the table, and explaining the product as it works.
"It's a term policy with an added cash accumulation account that doesn't pay very well, and it's probably going to cost you more and more money each year as you get older, especially after age 45 or 50. If you're not prepared or capable of paying those higher premiums, you'll end up with no savings and no insurance." Are there many agents out there marketing this stuff who actually say something like this to their clients besides me? I'd like to hear about it from you.
Reason: UL is an incredibly expensive form of ART because of the cash accumulation and the insurer's need to siphon monthly administration fees, policy fees, M&E & loads (in VUL due to the guaranteed death benefit and separate account securities purchases), and on and on.
The "attraction" to UL in the 1970s/80s when it was created was the 13-20%+ interest rates that were being offered compared to 3-5% in traditional WL. And when those policies began collapsing in the 1990s, the insurers who wrote them ended up paying BILLIONS in regulatory fines and civil judgments, plus restitution and other compensations to insureds.
Today, if you can find a UL policy crediting current interest above 5.5%, you've found one of the highest current rates. But I'm still seeing agents present illustrations at 6-8% which is entirely unfair to the client, since the policies aren't even earning that much (except for maybe a first year teaser).
What's so bad about illustrating 6% or 7% or 8%, you might ask? Simple, iit wildly inflates the cash accumulation, and, at 8%, your minimum premium is far smaller than if you were shown the premium required to support the policy at the 4% minimum guaranteed rate. and based on a 5.5% current IRR and premiums calculated against an 8% hypothetical, straight line IRR, the policy is going to implode somewhere within about 12-15 years down the road from issue, depending on the insured's issue age.
To me, that's as close to a crime as one can come without being a true criminal. I can put the same person in a 15 year term policy at maybe 1/3 the cost, and he'll be $000s ahead at the end of term by simply putting the difference in a shoe box under the bed earning 0%. Or into a traditional WL policy for about 1/2 the cost or a little more than the UL (Opt II, of course -- yet most agents only discuss Opt I because they know Opt II is more expensive).
Or I can show the client how much he really needs to pay to support the policy for the next 50-70 years, and hope he doesn't have a heart attack on the spot. But if he's capable of and willing to put that much into the policy, he won't need to waste any money at all on a no lapse guarantee. And if things turn around and insurers start to up the interest being credited to their UL policies, he'll be able to reduce his premium payments and still support the policy, or continue the same premium and have one of the few Opt II policies that really does exceed the face amount by many $000s.
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California-licensed Property & Casualty Broker-Agent and Life & Health Agent. CA Insurance License #0596197. Send me your questions, and I'll send you my answers. I live, breathe, and teach insurance! |
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MaxHerr
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| Posted: Wed Dec 02, 2009 11:03 am Post subject: |
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Max, the underlying premise of term insurance is not that one won't need life insurance their whole life. That is the underlying premise of people who say that one should only buy term insurance.
I agree that term insurance is best for temporary needs. However, despite the fact that people usually need life insurance for longer than they think, term insurance serves a very important purpose. Premature death does occur and the best type of insurance is that which is in force. Without term insurance, people can't afford the proper death benefit.
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ajlfwwf
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| Posted: Wed Dec 02, 2009 11:26 am Post subject: |
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Max, I agree with most of what you are saying about UL. However, you are missing the boat with the secondary guarantees.
It's not a dodge by the insurance companies. Think of a secondary guarantee as saying, "Hey, if the incredible high costs associated with this product cause the policy to reach the point that it has no value, the insurance company will still let you keep the policy in force until death."
One big problem with UL policies is obviously the chasis of ART. ART isn't designed for long term insurance needs. The increasing insurance costs combined with human nature to underfund/remove money/ect. cause these policies to lapse if one lives a long life.
A no lapse guarantee essentially changes an ART product to a level term product with the term being "until death". One funds these at the minimum level. Between surrender charges and costs, the cash surrender value may never go above $0.
I don't like these products at younger ages.
When you have a few minutes, try the following. Assume that you have a healthy 65 year old who wants to leave as much behind as possible at death and not take investment risk. How much will it cost to buy $1,000,000 of WL? Now, take this same amount of money and put it into a UL policy with a secondary guarantee with minimum funding. How much death benefit will it buy? How many years will it take for the WL policy to have a higher death benefit? The person will probably have to live to be in their mid-90's.
"Hey, Mr. Client, UL will leave your family more (based upon current WL assumptions) if you die between now and age 95. WL will leave more if you live past 95. Which do you want?"
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falruvma
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| Posted: Wed Dec 02, 2009 2:15 pm Post subject: |
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Falruvma . . .
You're quite right. Somewhere around age 55-65, new cash value policies make more sense than term. But the needs you describe are the ones I think of as estate planning uses. Wealth accumulation has largely been accomplished and now the game has turned to one of wealth preservation, expecially the protection from government intrusion through estate taxes and the wealth redistribution schemes that the Democrats are so fond of. [Disclosure: I am a registered voter, but neither a Democrat or a Republican. I detest both equally!]
So, I think we're in agreement that WL/UL has a place alongside term. From an agent's perspective, it comes down to knowing which product to recommend at which time. In the example you propose, I would recommend a single premium purchase of either product to obtain the lowest possible cost. But still, most individuals are going to choke on the amount of money necessary, and wouldn't want to commit to it.
So the workaround is premium financing, which has always been known in P&C circles, but is just now becoming a topic of discussion in Life circles, in precisely this type of need. And when properly priced (using the maximum guaranteed COI or "minimum assumptions"), the need for the additional "costly guarantees" is obviated. So the client saves even more. Yes, the premium financing will cost something, but not nearly as much as the increasing amounts needed to support a UL policy in one's 80s, 90s or beyond.
It will become an even more pressing issue after EGTRRA expires at the end of next year -- the hand writing on the wall is already apparent. I'm expecting 2011 to be a HUGE year for new UL/EIUL estate planning sales, and I'm beginning to position myself for it.
Thank you, Democrats, for the coming redistribution of commissions to life agents. But we agents must not become greedy and forsake the needs of our clients. They are the MOST IMPORTANT element of our success.
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California-licensed Property & Casualty Broker-Agent and Life & Health Agent. CA Insurance License #0596197. Send me your questions, and I'll send you my answers. I live, breathe, and teach insurance! |
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MaxHerr
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| Posted: Wed Dec 02, 2009 2:37 pm Post subject: |
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| Quote: | | Yes, the premium financing will cost something, but not nearly as much as the increasing amounts needed to support a UL policy in one's 80s, 90s or beyond. |
Max, With your posts, it sure doesn't seem like you understand the secondary guarantees. You seem knowledgeable, so I'm probably wrong about your lack of understanding.
The secondary guarantees of the UL stop the need for increasing amount to support the UL into one's 80's and beyond. A level premium will guarantee the death benefit regardless of what happens to the cash surrender value.
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| Posted: Wed Dec 02, 2009 2:43 pm Post subject: |
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Also, I don't know why you would recommend a single premium purchase. Sometimes, I might, but I wouldn't make that assumption.
With a single premium purchase, it hurts the client if death occurs early. If the money is qualified money, this will also typically involve much higher taxes because of the withdrawal to pay the premiums.
If someone wants to pay it one shot, it often makes sense to buy a SPIA and then let the SPIA payments fund the life insurance premium.
I also don't know why you are recommending premium financing. Premium financing primarily makes sense because someone's net worth is not liquid or they have something to do with their money that will pay higher than the loan interest rate. Otherwise, how does premium financing make sense?
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