vul basics for anna li’s baseshop training only. what is vul variable universal life --after 1984:...
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VUL Basics
For Anna Li’s Baseshop training only
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What Is VUL• Variable Universal Life
--After 1984: section 7702 of DEFRA defines "life insurance" and investment" for tax purpose"
It is based on
• Law of building equity, and
• Law of decreasing responsibility.
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Two Components of VULsTwo Components of VULs
Life Insurance
VUL
Mutual Funds
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Investment Options
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What is VUL good for?
– Insurance Protection– Retirement– College fund– Mortgage protection– Tax planning– Estate planning– Privacy & Protection from creditor– Flexibility
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Features of VULFeatures of VUL• Insurance – permanent• Separate Account:
– Professional Money Management– Diversify @ Asset Allocation– Dollar Cost Averaging– Tax-free transfer– Conveniently accessible TAX-FREE loan (IRC
7702) after the first policy year – not required to return
– Income tax-free upon death
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VUL FeaturesDeath Benefit Options:
• It is important to know if the client’s need for insurance will increase, decrease, or remain the same over the insured’s lifetime.
1. Option A = level death benefit
2. Option B = increasing death benefit
3. Option C = combination of A & B
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VUL Charges & ExpensesOther Potential Costs:
Transfer Charge:Transfer Charge:
Charge for excessive movement among sub-accounts Charge for excessive movement among sub-accounts
Preferred Product Provider Example:Preferred Product Provider Example:
Allows 12 free transfers in a year before $25 charge. If Allows 12 free transfers in a year before $25 charge. If transfer through internet, free for charge even over 12 times.transfer through internet, free for charge even over 12 times.
Surrender Charge:
If Policy is surrendered during the first 10 years the client is charged a penalty fee from the cash value and the rest is sent to the client (NSV). Can be offsetted by the long term investment strategy.(After 10 years, no Surrender Charge)
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Loan interest charged:1~10: 2.75% 10+: 2.00%Max<3.00% (guaranteed)
Loan reserve interest rate credited:2% (guaranteed)
Effect of policy loans1~10: 0.75% 10+: 0% Max: 1% (guaranteed)
VUL Sub-AccountsVUL Sub-Accounts Loans from Policy:Loans from Policy:
Loan Credit
1~10
2.75% 2.00%
0.75%
2.0%
10+
0.0%
INS
INV
loan
reserve
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WRL FEB
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Accumulation VUL (John Hancock)
For internal training only
• Flagship VUL product specifically designed for long term asset accumulation with life insurance
• Technical Spec.– Premium charge: 8% 1st y, 4% >1st y– Loan: 4.25%-3%=1.25% first 10 y. 3%-3%=0% >10 y– Asset Credit: 0.05%>10 y– Admin Fee: $10/month– Per BFA charge: level for 10 years
• Riders Highlights– Cash Value Enhancement– Long Term Care
• Illustration• Comparison
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Protection VUL (John Hancock)
For internal training only
• Flagship VUL product specifically designed for life insurance with asset accumulation
• Technical Spec.– Premium charge: 8% 1-5y, 2% 6+y– Loan: 4.25%-3%=1.25% 1-10 y. 3%-3%=0% >10 y– Admin Fee: $15/month– Per BFA charge: level for 4 y
• Riders Highlights– Extended Non-lapsed Guaranteed– Long Term Care
• Illustration• Comparison
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• There has to be a need for insurance protection
• Clients have to be able to afford
• Clients have to be able to accept some degree of market risk
• Clients have investment need
VUL SuitabilityVUL SuitabilityDetermining Suitability:Determining Suitability:
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The Shortage About VUL:
You can’t use money in the first year. If cancel within 10 years, it has surrender
penalty.
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Who sell VUL?
• More than 100 companies market VUL
• The agent who sells VUL must have life insurance license and security license
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Frequently Asked Questions about VUL
Frequently Asked Questions about VUL
How many years I have to pay the premium? How much money I have to put in? My account was locked, isn’t? Term is cheaper Is it true that there are a lot of hidden cost? Too good to be true What about tax law changes? What if insurance company get bankrupt?
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Some of the good things about VUL
Some of the good things about VUL
Discipline/commitment/good habit
(We should commit: 401K, Mortgage, Child, marriage, why not VUL?)
Peace of mind for a responsible man/woman Show personal value (how much you worth) Flexibility and the Living benefit, like after first
policy year, can loan out from surrender value 90% without pay any tax for any use.
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How To Think About The COI
• Term is cheaper, but it has 1% claim rate, the premium from your own packet.
• After tax money
• Every family should has a permanent life, Permanent life vs Term life
House vs Rent
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Can I Afford The COI Of The VUL When I Am Getting Old?
• When you old, the insurance you need to buy is proportional to the cash value, which is very small when you are old (example: when a male 76 years old, if cash value is $1M, only needs buy $50,000 Insurance, the cost is $650/yr)
• The outstanding loan won’t affect the cash value• The more of the COI means you have more
cash value
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When is good time to buy VUL
• Now ( the sooner the better)
• Every body needs protection, investment, flexibility for use, Tax advantage, Law suit protection.
It’s time for all to invest to the good plan!