I’ve been blogging since the first of the year about the coming changes in universal life products that have external no lapse guarantees. Well, there’s good news and bad news on that front.
The good news is that it is still available from the top companies at their present rates with the same outrageously good guarantees. The good news is that if you have it in force, those prices and guarantees are locked in and can’t be changed. The good news is that if you have an over funded universal life or whole life policy (has more cash than it needs), you can do a 1035 exchange into a NLG universal life and get far more bang for your buck. The good news is that even if you blow off the chance to get this permanent life insurance product at rates that will never be seen again, even at the new rates it will likely still be the best permanent option available. Prudential announced last week that they would be raising the rates on their no lapse UL by 5% which will still make it much more competitive than traditional universal life or whole life.
You won’t hear this from the cash value policy giants like New York Life or Northwestern Mutual, but doing things like estate planning or planned giving and building up cash value in the policy is a waste of money. When the insured dies, the beneficiary doesn’t get the death benefit plus the cash value. That cash value will have served no other purpose than maybe a lifestyle change for the agent that sold it.
Oh yah, the bad news. Protective Life announced today that they are discontinuing term conversion to their killer good UL with a no lapse guarantee. They haven’t announced any change in the product yet, but as of the middle of this month there won’t be any future conversions to it. To me this feels kind of like their first step toward ending or changing the UL. They have just ended one facet and limited the market for it. The largest UL market for most companies is their conversion business anyway.
Another interesting snippet in this Protective release was a rate increase for their 30 year term. This is the first change we’ve seen of a major player increasing term rates, but as this recession gets worse I think we can count on seeing more and more in this direction. Term insurance rates have been going down for, well it’s hard to count, but well over ten years now. The rates are at crazy historic lows and it is my belief, my prediction, that we have just seen the beginning of the end of that trend. There may still be a few rate wars, but I’m convinced you are looking at historic lows. Buy now or forever hold your peace.
Bottom line. The economic meltdown has affected everything. We are fortunate that it has not impacted life insurance as much as the rest of the financial sector.