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Other Articles
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Life Insurance
Time to Review Your Variable Universal Life Insurance Policies
By Amy Rose Herrick
Amy Rose Herrick, ChFC, IAR Economic Consultant, Amy Rose Herrick, ChFC, Economic Consultant
Equity markets have been very strong performers in 2005 and year to date in 2006. VUL policies that contain this investment component in addition to the insurance component are responding to consumer demand for participation in the markets with restructuring of offerings, better product design and changes in the way the policies are underwritten and marketed to consumers.
In the last year there has been the development and addition of several new riders with new guarantees never before offered as part of the revamping of this life insurance tool used by millions of consumers. What if you really don’t need these new guarantees? No problem, omit them from the policy application and you don’t pay a little extra for them either when they are not a good fit.
You will see an emphasis on increasing the number of investment options in addition to the fixed accounts available. Note that more is not always a better option for the consumer. The quality of the sub accounts should bear more weight than the number in many cases. Some policies may limit the number of sub account elections you have in the policy to no more than perhaps nine at a time. In that case having 35 or 85 options to choose from may not make a lot of difference if you can do no more than nine allocations at any given time anyway. Some have no restrictions on the number of allocations allowed as long as they are in even percentages or at least 1% in each allocation, so ask.
It is now common to find multiple fund groups in the same policy adding a wide range of diversification options to the line up of investment options to choose from. There may be four, six or more fund families represented in addition to the fixed account allowing you to move between the fund groups at will without incurring any exchange fees to do so, a very attractive no cost policy diversification tool and feature.
Because you can elect and change in most cases whenever desired where the costs of the actual insurance premium is deducted by filling out a simple form, you have a lot of flexibility here to manage account values and how premium dollars and policy fees are deducted. You could designate the premium deduction and policy fees come only from a Money Market Account that you have pre-funded, a fixed interest account that has been pre-funded or proportionately from all holdings. You would replenish the corresponding sub accounts like a Money Market option as needed. Generally this would occur when you reallocated your policy investments on a regular basis.
Are you a rated person paying extra premiums for in force coverage? Did you know some insurers are offering what is known as “table shaving” programs in the VUL product lines that could benefit you substantially? Well, for one example, if you were rated a “table three” or a “Table C” before, if there is really no change in health, with the new underwriting guidelines and table shaving, you would likely be offered a new policy at “Standard” rates and no extra premiums. This little known change in how VUL policies have been restructured for pricing could save you thousands of dollars in premiums over the life of the policy.
Are you a breast cancer or prostate cancer survivor? The advances in early detection, successful cancer treatment protocols, plus the resulting excellent survival rates for many forms of the disease have changed the life insurance availability options for men and women of all ages recently. How? With the announcement contained in a little distributed press release that indicated one major VUL provider would now insure a large segment of these individuals as “Standard”. When can they apply? In as little as two months after surgery, depending on the diagnosis and pathology reports. This is a fraction of the prior waiting period of two to five years that was an industry wide standard just a few months ago, plus ratings were likely imposed by underwriting guidelines, but no more. To date, no other insurer has yet followed suit.
Simply put, the diagnosis of breast or prostate cancer is no longer the instant life insurance disqualifier it was only a few short months ago. Unfortunately, the vast majority of men and women this will benefit today don’t know anything about the opportunity before them in the VUL product. They go on assuming they have to continue waiting for up to five years to be considered insurable once again after diagnosis and treatment.
Are you a married couple both healthy, or with one or both experiencing some serious health problems? Is it your desire to pass unneeded assets to heir’s tax free privately outside of probate and free from Estate Taxation too? Have you considered or been exposed to the possibilities a Joint Life VUL? At some companies you can have one person who is rated and one person who is literally uninsurable and still be offered affordable coverage. Why? The policy will only pay at the second death, so the first death will not change policy provisions.
If you are a breast or prostate cancer survivor, a married couple who is interested in investigating how VUL may meet your estate planning needs, or if you have any old life insurance policies that have not been reviewed in a while, it is time to pull them out and allow a qualified professional to determine whether or not the coverage you have in force is the right fit for you now that the new generation of VUL has arrived on the scene.
You will need to visit with a licensed, experienced agent who can assist you with identifying, presenting and implementing any coverage changes that would be to your benefit. Your agent would also handle all the details when it comes to comparing different company product offerings based on your unique insurability situation and they would handle all the research efforts required.
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