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.
[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).
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.
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:
About Penn Mutual:
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.
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.
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.
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.
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.
John “Hutch” Hutchinson
ChFC®, CLU®, EA, AEP®, CExP®