Whole Life and IUL Changes for the Worse in 2020 - Banking Truths
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Whole Life and IUL Changes for the Worse in 2020

If you’ve been on the fence with using life insurance as your own private bank or retirement vehicle, then now is DEFINITELY the time to explore your options.

Why, you ask? … Things are about to get a little worse across the board with some new industry regulations.

Scroll down to hear Hutch’s 3-minute explanation via video or you can read in more detail by expanding any of these topics below:

We invite you to schedule a call with us to discuss some of the older products available until early November 2019.

Expand to learn more about why/how the 2020 regulations make the new cash value policies less favorable

[2019 Update] Major Industry Mandate Which Lowers the Cost of Death Benefit Doesn’t Necessarily Translate to Better Performance with Whole Life insurance or Indexed Universal Life (IUL).

Why?

By January 1, 2020 all life insurance companies must update their cost structure to adopt the newly created 2017 mortality tables and abandon the current 2001 mortality tables. Some carriers have already done so, while others are waiting until November to meet this year-end deadline.

Won’t this major overhaul mean a lower cost of insurance?

Since the new tables show that people of every health class are living longer thanks to modern medicine, the cost per unit of insurance for all types of permanent and term life insurance will indeed be lower across the board. However, this is just one ingredient in the formula determining the overall costs that drags against the cash value in a policy designed for maximum growth and income.

What else is changing that can affect policy fees?

Along with the advantageous reduction in overall mortality charges, the regulations for MEC Testing are also being completely revamped, and unfortunately, this change is not favorable for permanent policies designed with cash value accumulation and tax-exempt income as their focus.

The new polices will be required to carry significantly more death benefit for any given amount of premium fueling their policy.

Or put another way, any given amount of death benefit will have to be funded with much less premium, so it will be more difficult for your cash value growth to outrun the charges.

So even though the cost per unit of death benefit will be reduced inside, there will be substantially more death benefit that your premiums must buy.

Therefore, the aggregate cost of insurance will actually be greater using the cheaper 2017 mortality tables than they were using the current 2001 mortality tables (soon to be obsolete). As the top new Whole Life and Indexed Universal Life products are coming out, we’re consistently seeing that this 10%-25% increase in death benefit is often resulting in a 3%-15% reduction of cash value and projected income (depending on age, health, structure) even though the cost per unit of insurance has technically decreased.

We invite you to schedule a time to compare your own numbers with us while you can still access some of the older products available until the end of the year.

Expand to learn about the best Whole Life product available and their November deadline

Penn Mutual’s Guaranteed Choice® Whole Life Insurance product (which is getting shelved November, 2019) has been the best performing Whole life policy hands-down for several years now.

This pic is from a recent agent bulletin declaring their deadlines to get this expiring product:

Here’s why Penn’s GCWL product has been greatly outperforming every other mutual company’s Whole Life product for years:

  • Penn’s guaranteed values often outperform its peer’s. This demonstrates an underlying efficiency of the policy chassis.
  • Illustrating Penn’s Guaranteed Choice® Whole Life policy using the current dividend scale not only beats but usually CRUSHES the competition in apples-to-apples comparisons using the exact same inflows and outflows.
  • Penn has an extremely Flexible PUA Rider which you only need to fund once every 5-years to keep your window open to continue over-funding at any time throughout the next 5-year block.
  • Penn has an extremely unique and important “Overloan Protection Rider,” which keeps your policy from imploding during retirement in case you have taken too many tax-exempt policy loans that you have no intention of repaying. Just before your policy is set to lapse in old-age, the rider locks in a minimal amount of cash value to support a minimum death benefit for heirs. This handy-dandy safeguard preserves the tax-exempt status of your prior lifetime distributions. (Note: certain parameters must be followed).
  • Penn’s chronic-illness rider is one of the most generous among Whole Life policies. First of all, it can be added to the policy for no additional charge. It allows for a tax-free advance of up to 24% of your death benefit (over and above your cash value) if you are deemed to have a chronic illness and need Long-Term-Care.

 

About Penn Mutual:

  • Established in 1847, Penn Mutual is the second oldest American mutual life insurance company behind New York Life.
  • Penn Mutual maintains the biggest percentage of surplus assets on their balance sheet compared to other mutual companies (Surplus was over 14.5% of General Account Assets as of January 2019).
  • Compared to the other mutual companies, Penn Mutual has the highest 5-year average yield on their investment portfolio (a full 1.3% higher than the average yield of its competitors).
  • Penn Mutual has maintained its dividend scale for 10 straight years after 2008 where all other carriers lowered theirs often multiple times (see graphic below). Only recently did Penn slightly lower their dividend scale, but it’s still crushing the competition.

Mutual Company comparison of different dividend paying Whole Life companies

This graphic shows the how 6 different companies that sell Whole Life insurance have either raised, lowered, or maintained their dividend interest rate (DIR) each year from 1999-2019. Penn maintained their dividend for 10-years after 2008 because of their superior portfolio performance and strong statutory surplus.

What Now???

Lock in your ability to get Penn’s Guaranteed Choice Whole Life policy chassis while you still can!

If you would like us to build something together from scratch or review a competitor’s illustration to see how badly Penn can beat it, simply schedule a no-obligation custom consultation with the Banking Truths Team. We will share our screen with you, create a custom policy for you in real time, and answer any questions you may have.

Remember, time is running out to even explore this option.

Book a Call to Explore Options

Click here to learn more about Whole Life Insurance.

Expand to learn about the best Indexed Universal Life product available and their November deadline

Columbus Life’s Indexed Explorer Plus is one of the best IUL products for a number of reasons described below. In addition to the 2020 changes industry-wide, Columbus won’t be offering some of the key policy riders on their new product.

Here is a recent agent bulletin about the upcoming deadline we expect to be sometime in early November:

Columbus Life’s Indexed Universal Life policy has one of the highest 1-year S&P 500 caps in the industry (12% as of September 2019), not to mention the absolute best 1-year uncapped strategy that tracks the S&P 500. Here’s why having an uncapped strategy is so important:

Notice the distributions of returns over the last 82 years in the S&P 500 are stacked to benefit IUL policies with uncapped indexing strategies

Columbus Life’s unique uncapped strategy gives you an unheard-of full participation on the first 5% of the S&P 500’s annual growth and then completely uncapped participation after 11%. Most other uncapped options erase the first 5%-6% of index growth. Columbus methodology is critical when using IUL for banking or tax-exempt retirement income because you can earn that first 5% to offset any loan interest when swinging for the fences with the uncapped strategy.

Columbus also has a 5.5% loan rate (guaranteed never to be higher than 6%) which allows you to fully participate in either the capped or uncapped index strategies (even with the money you borrowed). You even have the ability to mix and match these strategies and change your allocation every year. Columbus Life’s Index Explorer Plus also has the highest fixed crediting rate (4.4% as of September 2019) when you’re bearish and want a portion of your cash value to simply earn a fixed interest rate rather than tracking an index.

Many companies that offer Indexed Universal Life have a chronic illness rider with no up-front cost that allows some sort of tax-free advance on your death benefit if you are deemed to be chronically ill. Of all the hybrid life insurance policies offering long-term care type protection, Columbus Life’s Index Explorer Plus blends superior performance with strong protection. The exact nature of the benefits available will vary by the state you’re in, but let’s just say that the protection is rather robust for a policy provision that incurs no cost or drag on policy performance until the provision is exercised.

The Index Explorer Plus from Columbus Life actually has different illness/injury triggers that allow for varying levels of tax-free advances of your death benefit depending on the nature and severity of your malady. Sometimes you can even qualify for a large lump-sum distribution while still preserving a reasonable amount of death benefit depending on the situation.

Also, no ongoing receipts are needed when accessing the tax-free cash during lifetime. Records from the doctor stating the severity of the illness/injury is all that is needed when making this kind of claim.

To be clear, there are other policies that have more robust protection against these long-term care risk. However, it’s rare that you can find one of the best performing IUL’s still having solid long-term care type riders built into the policy with no up-front costs.

What Now???

Lock in your ability to get Columbus Life’s Indexed Explorer Plus policy chassis while you still can!

If you would like us to build something together from scratch or review a competitor’s illustration to see how badly Columbus can beat it, simply schedule a no-obligation custom consultation with the Banking Truths Team. We will share our screen with you, create a custom policy for you in real-time, and answer any questions you may have.

Remember, time is running out to even explore this option.

Book a Call to Explore Options

Click here to learn more about Indexed Universal Life Insurance.

 

Book a Call to Explore Options
 

 

Note: No final monetary decisions will need to be acted upon until closer to the end of the year. However, an application will need to be in by early November, which by the way, doesn’t obligate you to any financial commitment. Officially an application is just a formal petition for a health rating and nothing more. Unofficially, a timely application extends your right to one of these older and more favorable policies.

So again, there will be no better time than NOW to explore your options and make the decision that’s in your best interest.

 

Book a Call to Explore Options
 

 

Happy Banking,

John “Hutch” Hutchinson
ChFC®CLU®EAAEP®CExP®

Click here to learn more about Indexed Universal Life Insurance.
Click here to learn more about Whole Life Insurance.