Which Permanent Solution is Right for You?
With so many options in Life Insurance, how can you be sure you’re selecting the right ones? You need an insurance consultant in your corner to ensure you are utilizing the best products and solutions in your insurance portfolio. At Colton Groome, we implement comprehensive plans with use of the following options in Permanent Life Insurance:
Whole Life
(Without Term Riders)
Advantages
- Guaranteed Premiums – cannot change
- Fully reserved with cash values available
to policy owners - Over 100+ years history. Whole life has consistently paid benefits
Disadvantages
- Expensive – highest premium for the death benefit
- Inflexible design – difficult to change premium or death benefit
- Actual dividends are unlikely to be as high as currently illustrated dividend crediting rates
- Dividends paid at insurance company’s discretion
Universal Life
(Without Secondary Death Benefit Guarantees)
Advantages
- Lower projected premium
- A great amount of premium flexibility
- Adjustable death benefit
Disadvantages
- Client at risk for having to pay higher premium
- Company can change cost of insurance, credited rate and expense charges
- Very little is guaranteed – Almost everything is subject to company’s discretion
Universal Life
(WITH Secondary Death Benefit Guarantees)
Advantages
- Low guaranteed premium
- Premiums remain flexible. However, changes in premiums or timing of payment may adversely affect guarantees
Disadvantages
- Very high expense loads lead to low cash values
- Inability to adjust charges may create financial pressure on the company
- No potential for better-than guaranteed results
- Little or no ability to adapt policy to future changes
- If not properly managed, guarantees can be lost, leading to expensive “catch-ups’ or policy lapse
Variable Universal Life
(Without Secondary Death Benefit Guarantees)
Advantages
- All expenses are described in prospectus
- Client selects investments
- Historically higher rates of return can be used to reduce premium payments, increase benefits or provide flexibility
- Additional safety of separate accounts gives maximum protection from insurance company insolvency
Disadvantages
- Client has a higher premium if targeted returns are not achieved as illustrated
- Volatility of returns affects policy performance. Some clients are not sophisticated enough to understand or manage product
- Product may not be suitable for very conservative policyholders
Variable Universal Life
(WITH Secondary Death Benefit Guarantees)
Advantages
- All expenses are described in prospectus
- Client selects investments
- Historically higher rates of return can be used to reduce premium payments, increase benefits or provide flexibility
- Additional safety of separate accounts gives maximum protection from insurance company insolvency
- Combines flexibility, low overall cost and potential for strong performance
Disadvantages
- These products have charges for the guarantees
- Younger clients with robustly funded VUL policies may prefer lower charges of VUL
- Guaranteed premiums are usually higher than with Non-Variable Universal Life. The upside potential may not offset this for older age clients
- Fewer insurance companies offer this product
Indexed Universal Life
(Without Secondary Death Benefit Guarantees)
Advantages
- Lower projected premium
- A great amount of premium flexibility
- Adjustable death benefit
- Somewhat higher cash value growth potential than Universal Life
- If chosen indices experience a loss, cash value protected by a minimum floor (usually 0%)
Disadvantages
- All the disadvantages of Universal Life
- Extremely complex product mechanics usually
accompanied by various administrative technicalities that may materially alter the product performance results - Limited historical information on carrier treatment of non-guaranteed performance elements related to the index in various economic environments
- It is a product that gives the insurance company the most latitude to change key non-guaranteed elements to the detriment of policy holders
The information provided is for educational purposes only and does not purport to be complete analysis of the material discussed, nor does is constitute an offer or a solicitation of an offer to buy any securities, products or services mentioned. Guarantees are based on the claims-paying ability of the issuing company. Variable life products are offered by prospectus only. Investors should consider the investment objective, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other important information, is available from your Financial Advisor and should be read carefully before investing.
