Genworth Life and Annuity recently unveiled its’ new “Term/UL” product, a term life insurance policy in a lot of ways that seems to have some advantages and disadvantages for consumers and for Genworth.
How is it the same as a traditional term insurance policy? A quick glance would lead you to believe that there are no differences. The “Colony Term/UL” is offered at competitive term rates and has a guaranteed level premium period of 10, 15, 20 or 30 years. There are some subtle differences when the product is illustrated and depending on your long term needs, they may impact how you structure your policy or policies.
So, what do I see as the upsides to this new product, and I’ll just hang it out there and say the upsides to this new industry trend because at least two other companies appear to be poised to release new term/ul products? The first upside is that it appears to be a “term” product that can be price sustainable for quite some time. The old (today’s) term products were starting to get gobbled alive by reserve requirements, the money that companies had to set aside to back up the promises they were making. The new products, because of some restructuring, don’t seem to be in that same boat.
Another upside is that it has a second level premium period. An old term policy would have a level premium for say, 15 years, and then if you didn’t convert to a permanent product the price went through the roof in the 16th year and went up every year after that. In the policy illustrated above the price does jump in the 16th year, but then remains level another 39 years. I checked and the price it jumps to is about the same price as a comparable no lapse UL policy at that age and rate class. Which brings up another plus.
They are guaranteeing that rate when you first buy the policy. Right now traditional term policies offer you the ability to convert, but they generally don’t lock themselves into what product or what price that will be 15 years down the road. It could end up being a universal life with a high price tag and a lousy guarantee. I like the locked in price when you buy.
The downside? This is why I mentioned that prudent planning up front may be even more important with the term/ul products. Although I don’t have all the details on how this will work, it appears that there would be some “surrender charge” if you made a change in the policy during the initial level term period. This could come into play if, for instance, you wanted to lower the face amount of the policy. It appears that they would gladly lower the face amount but may hit you with a surrender charge that would make the move, well, stupid.
So, prudent planning might be to carry more than one policy to make up the full face amount. This would allow you to have all you need and have the flexibility to drop coverage, lowering the face amount, without a surrender charge.
Bottom line. As I get more details I will provide illustrations on how these policies work in different scenarios. For now let’s just say there’s a new product in town and it looks like the consumer may be the winner.