For as long as I’ve been sharing the “life insurance world according to Ed”, I have beat the drum as hard as I can that there is only one good permanent product out there and it doesn’t have cash value. It’s called universal life with a no lapse guarantee.
Structurally the same as term insurance, rather than using internal cash like traditional universal life or whole life, the UL no lapse uses an external guarantee to keep a level premium. Having an external guarantee simply means that all of the weight of the guarantee is on the reserves that, by law, the insurance company has to maintain.
Today I heard from two reputable national general agencies that AXA Equitable may actually discontinue their no lapse products due to the reserve issues. I think you can read that “the high cost of keeping large reserves”. These same sources say that other companies may follow suit and either do away with the external guarantee UL or raise the rates on it. So, what does this mean to you, the life insurance consumer?
FIRE SALE! If you have been considering permanent coverage for any reason at all, it is time to get off the fence and buy this product while it is still available at truly bargain prices. If you have a whole life or a universal life “cash cow” policy, it is time to consider replacing it with this truly great deal. If you have been considering a final expense policy, buy it now while it is priced like a term to age 100.
Even though these policies will be changing in the near future, either going up in price or going away, those who have locked in the low cost external guarantees available now will be assured of having a bargain for as long as you need the insurance. Life insurance companies can’t go back and retroactively change guarantees.
Bottom line. Universal life with a no lapse guarantee is a golden product. Whether you are simply wanting final expense money for your family or if you are funding a second to die policy to pay estate taxes, whatever the permanent reason, it just doesn’t get any better than this. And if this product goes away, it likely won’t ever be this good again.