Should we switch our fluctuating common energy insurance policy to a guaranteed complete natural life policy?
My husband and I each own variable univeral policies...our agent is suggesting we translate over to guaranteed universal policies - we will free a few hundred dollars a year and add 100k onto the benefit. My husbands policy be bought in 1999, mine contained by 2001. We were not using the existing policies as an investment. Does it trade name sense to change presently? (we are in our hasty 40's) The agent suggested that in the adjectives insurance costs may rise, and we may not be able to afford the current policy- but the trial policy rates are guaranteed to never increase. Any thoughts or advise?
Answers:
What is your main grounds for having existence insurance? If I were you, my basic reason is to protect my family's income contained by case I die. If you are looking to build reserves for retirement, then natural life insurance is not the way to move about. If you want to do both, buy term and invest contained by a savings vehicle that meet your investment objective.
A mutable universal existence policy is where slice of premium payments is invested in the stock souk and is put into an account call the cash efficacy. So there is nought guaranteed that your cash attraction will grow. It may even lose money.
In a guaranteed universal vivacity policy, none of premiums is invested. Instead the insurance company will give you a guaranteed interest rate on the currency value. That is the simply difference between them two.
To me, both of these policies are not good because of the currency value phase. You lose all the currency value when you die, so necessarily you were paying too much premiums to start near. If you ever wanted to use the change value, you can single borrow the surrender value, which will diminish the death benefit.
I suggest you buy a 20 year possession insurance. It will save you lots of money and you can bring lot more coverage if you want. At the same time, you and your husband should unfurl a Roth IRA. You can't have reciprocal accounts in a Roth IRA, they are for one individual only. If you invest $100/month for subsequent 20 years at a 10% rate of return, you can have $76,570. If your husband does duplicate, he too can have $76,570. When you are within your 60s, do you really still need life span insurance? If you still do, then you should ask yourself, "do I still entail as much coverage?"
With your current universal duration policy, I suggest you surrender it. I don't know how much you and your husband have within the cash expediency. You can only contribute up to $4000 for excise year 2006 and 2007 into your Roth IRA. If the cash surrender good point is more than that, then put contained by $4000 now for duty year 2006 before April 17. And put the rest (up to $4000) contained by for tax year 2007. For 2008 and beyond, you want to invest using the dollar cost averaging concept. This is where on earth you invest the same amount every month, no situation how the stock market perform. By doing this, you will lower the cost per share.
In nonspecific it's not a good view to exchange one life insurance policy that have cash contained by it for another. It usually benefits the agent more than the insured.
That said, there is a concrete plus to having a policy guaranteed to rate a dealth benefit as long as you pay the premiums. One of the problems beside the original UL's is that they COULD run out of money if the cost of insurance contained by later years started ingestion away at the cash advantage you build up in the instigation years. After all, UL is residence insurance with a lolly value. As near ALL term insurance the cost of insurance get higher as you age. I other warned my clients to save an eye on that, and to try to increase the premium each year to oblige offset that possibility.
This Guaranteed policy is a path to address that, and it seems a prized option.
I don't know ample about these up to date policies to give you a pat answer. I will convey you, though, that I'd do my research on this. Have your agent run illustrations (examples) next to both policy types, and look at the best-case, worst-case and intermediate scenarios for respectively. Also, see what would happen of you took that extra few hundred you're abiding a year and put it into the Guaranteed UL.
Good luck!
Edited to add:
The subsequent poster hasa verypopular point of view, and I can't articulate he's wrong about most of what he say. There is one point, though, where he is not 100% correct. In some Universal Life policies the change value IS added to the disappearance benefit - which is really not a bad operate at all.
Also, I agree that occupancy has it's uses. It does enjoy some downsides, though, that you need to consider. First, as you age residence gets much more expensive. At the call a halt of the 20 years the next poster recommend it will be MUCH, MUCH more expensive, and you may or may not still be healthy ample to qualify for it. If you still need existence insurance at that point you will pay big.
There is no right answer here. THere's lone a right answer for YOU.
The difference between an independent agent and a captive agent is that the independent can't flog policies for the TOP insurance companies (ie State Farm, Farmers, Allstate, etc). Indys sell base on price, it just doesn't situation as much whether this or that company has a great track transcription of customer service, or whether this or that company is gonna try and weasel out of paying a claim(or whether the company will be around for the next renewal).
Don't use duration insurance as an investment tool. If you need a voluminous death benefit due to nearest and dearest obligations, the merely cost effective path to do this is with a residence policy. That being said, as long as you enjoy wisely invested the "dosh value" in your VUL policy, it doesn't sort any sense to switch it to a guaranteed UL policy that is vitally gonna pay the inflation rate.
Ya know, life insurance is NOT an investment. Either approach, you're throwing good money after desperate.
You need to digit out what you want your life insurance to do for you, and sit down beside an INDEPENDENT agent that you trust, to figure out the best agency to get nearby.
Well, you've be pretty well bested over the head beside some of the answers here so let's look at a bit more of what you're asking.
There are some other considerations here. In your variable product depending on your asset allocation of your sub accounts, you're expected making anywhere from 8-12% over time. That should more than make up for any increase surrounded by cost of insurance over time, plus provide you surplus. In a guaranteed UL (I'm presuming since you didn't say so that it's not an equity indexed product), you're liable to be guaranteed single about 4-6% or so. (Inflation is running at give or take a few 3.5% nationwide right very soon.) There is a good unpredictability too that the accounts that generate this are part of the standard accounts of the insurance company and are not outside subaccounts.
If they are part of the common accounts than that leaves them liable to being taken by a creditor if, for doesn`t matter what reason, the insurance company go belly up (unlikely, but it has be known to happen). Sub-accounts surrounded by the VUL are not liable to that potential problem.
You say you aren't using the VUL as an investment. Why not? Your money can grow levy deferred within it and you can access it due free and needn't wait till your 59 1/2 as you would if it be in some other import tax free access products.
Has your agent shown you the possibility of an Equity Indexed UL? You seem to be somewhat fiscally conservative (at lowest from the tone of your note here) and an equity indexed product might be something to look at. Most such products own guarantees of about a floor of 1-2% beside a cap of something like 12% or so and likely average roughly 8% over time which is above your standard UL but most likely smaller quantity than the potential returns of a VUL.
I would suggest you might also like to simply telephone your own insurance company and speak to them. First, see if they can explain all the ins-outs and potential export tax benefits that your VUL can perform for you. You might find out if they hold an equity indexed product that they might be willing to do a 1035 exchange into that would make the best for you. They might even be willing to do so short any surrender charges being imposed, if you ask, though they probable would start a new contestability time.
Lastly, I wouldn't take anyone's design on a board like this (including my own) short first determining just what it is that YOU and your HUSBAND necessitate. What is your strategy? Where do you want to be 10, 15, 25 years from now? Do you already enjoy your retirement funding going? If so, is it all contained by a tax box that might will you vulnerable to taxation on repeal?
Have you considered simply reallocating your funds within the VUL to see if you can bring its recital more in flash with what you'd prefer to see? If the obligation for $100,000 extra coverage exists, is it a permanent one or could it be handle by adding a small occupancy policy outside the VUL? Or even adding on one inside it?
These are just SOME of the question you might wish to consider. Good luck