I’m on about my 15th drum now. I’ve beat so many of them to death about life insurance guarantees that I have a restraining order keeping me away from the local drum shop. Life insurance companies have been selling assumptions on whole life and universal life forever. What they say about assuming couldn’t hold more true when it comes to life insurance. It’ll make an ass out of the insurance agent for representing something that isn’t guaranteed and it will definitely make an ass of the customer that doesn’t insist on an agent showing them guarantees.
There has been a lot of movement in the no lapse guarantee UL market over the past two years. It’s affected both the new insurance market and for far too many, their ability to convert their term insurance to a lifetime guarantee product. I don’t think I am overstating the point to say that I believe conversion to a permanent product (permanent defined as guaranteed to be there when you die) is a God given right and that the companies that take it away from their faithful customers will burn in hell. It will be a hell made of lawsuits from families that were robbed of what they were led to believe they had.
Genworth made a move this week that I think drives home the point that assumptions aren’t worth the side of the page they are illustrated on. They are no longer going to show non guaranteed or assumed values on their universal life illustrations. To me this is just completely honest and refreshing. Just like a term life insurance policy, why would you show non guaranteed values that have no impact whatsoever on the reality of the policy?
It seems this move along with other company’s moves to change or do away with their externally guaranteed no lapse universal life products are just a sign of the times. For some it’s a wonderful time because you can finance a house at 3%. For those who were depending on higher interest rates to support their variable UL’s and traditional UL’s, life isn’t so great right now. The low interest rate environment appears as though it is going to be around for a while so I’m glad that I am no longer in the minority when I tell people to ignore non guaranteed values.
With indexed universal life companies and agents out there still beating their drum about the 7-8% returns on their policies I would just ask each person considering that kind of purchase to consider 1. Is that a reasonable assumption today because it sure isn’t guaranteed? and 2. Does it strike you as a reasonable sustainable assumption?
Another sign of just how low interest assumptions should be are the life insurance companies that will only pay 1% on 1035 exchange money. You might have a whole life insurance policy with a 2% or 3% guaranteed interest rate, but that same company may only pay you 1% if you dump in cash from another policy.
Bottom line. This isn’t anything new from me. Along with the reality check on assumptions also comes the good news. It won’t last much longer, with two more companies announcing rate increases this week, but there are still some extraordinary values to be had in no lapse guarantee universal life policies. These are prices you will never see again. Read my lips again. If you need permanent life insurance or have permanent life insurance that you would like to pay less for, don’t get caught sitting on your hands. Now is the time to buy it. If you have any questions or would like to get a comparative illustration, call or email me directly. Let’s talk.