Here’s a case I reviewed this morning. Client tells me the policy was put in force for accumulation planning. Death benefit was an afterthought.
Since the policy was placed in mid 2015, the S&P 500 is up 13.76%. The return of premium to cash value inception to date is -4.32% at the end of the 10th year, subject to year-end crediting.
I know life insurance accumulation products aren’t going to look great this early in the transaction. That’s the way it works, but it would have been nice for the client to understand this. They had no idea.
The projected return from today over the next 10 years is 2.57%, making it .78% from inception. It never gets better and gets worse the further out you look. Of course, they can make changes, but it’s never going to do what they originally understood.
We know that IUL policies need to be built a certain way and they need to be managed However, this is also what I see in the field a lot. This is what you’re up against reputationally.
The death benefit was multiple times the minimum allowable and the expenses are eating it up. At the maximum AG49 rate (Max AG49 rate represents the highest interest rate an insurance policy is allowed to be illustrated at) today the policy doesn’t even project to stay in force indefinitely, even if changed to a level DB today.
Here’s the question: How is the client supposed to know that their policy wasn’t built properly for their stated purpose? Without a doubt the client was tuned into the gross crediting rate that was focused on during the process. How would the client know that the death benefit could have been much lower resulting in a more efficient transaction?
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OC Consulting Group and its affiliates are separate entities from Valmark Securities, Inc. and Valmark Advisers, Inc.
Guarantees are based on the claims-paying ability of the issuing company. Indices are unmanaged and do not incur fees. One cannot directly invest in an index.
The examples given are for illustrative purposes only and are not intended to represent the experiences of all clients. Past performance or outcomes are not indicative of future results.
