@tamimolina888 So without knowing your age or the details of the policy we can’t comment on whether it is high for what you have it if it’s a good deal or not. Having said that presuming the payments will remain level you’re paying 1.2% per year for $1,000,000 which doesn’t seem unreasonable. Considering the “wholesale” cost of a million dollars of permanent insurance is roughly 70% of the benefit between now and life expectancy it seems like a pretty good deal.
@tamimolina888 That doesn’t seem totally unreasonable - how long has the policy been inforce?
If you are concerned, I would go back to your employer - tell them your concerns. Ask if it’s possible to get a policy review done at the next policy anniversary that stress tests the product at various rates of return. For VUL - 4%, 5%, 6%, and 7% or whatever rates you feel comfortable with. You can also run 0% returns in various intervals as well if you wanted to really stress test it.
That will tell you what you need to know - and ask for the annual cost summary to be included which summarizes the charges.
For what it’s worth - if the policy is still in its earlier years, there are usually some higher charges in the earlier years due to carrier costs of acquiring the business.
@tamimolina888 9% is premium tax and other fees. The good news is you have tax deferred growth, tax free access to the cash value and tax free death benefit. Group VUL is usually guaranteed issue as well. There can be a number of reasons why your firm implemented this plan. Maybe a Managing Partner needed a guaranteed issue plan or the firm wants the be sure a partners Family/Estate receive $1mm while a partner and also accumulating cash value for the future.
@jwalk33 I think this is all the correct explanation. Just a bit frustrating when I don't really need the coverage (this is actually on top of a significant amount of other coverage they require) and actually sort of need the money in a moment. I'm paying nearly 10% on a separate loan (long story), so paying down that loan would be a far better investment.
@tamimolina888 Yeah that sucks. This is not uncommon though. Congrats you’re a Partner now you get this life insurance and oh by the way you pay for it too. That’s usually how it goes.
@tamimolina888 Everyone on this thread who is saying this is an expensive policy has never looked at the expenses of the UL/IUL/VUL policies they are selling. 6% premium tax alone is common. Depending on the state it’s purchased. Then include the admin and COI’s this is pretty common.
@tamimolina888 I agree with an earlier poster, if you are consistent showing annual charges and premium then the math is off on the $81 being 9% of $11k. That would be .9%
@tamimolina888 Then yes that does seem high in relation to premium which means you are closer to minimally funding the policy. This can be dangerous for the health of the policy, especially since it is VUL and can experience downside market loss.
@kim5398 Yes, it is definitely minimally funded. the reason is that I was trying to give them as little money as possible since I don't want this policy to begin with. When I emailed asking why the fees were so high, they said something similar, basically like "oh, well if you gave us more money it would be better", which seemed like a red flag.
@tamimolina888 Yeah, I don’t understand how they can force you to purchase a policy that you are fully paying for. I haven’t heard of that. Typically in either a split dollar or key person policy, the company pays at least a portion of the premiums on the policy. Either way that is pretty irresponsible to get a policy which has small chance of success long term.
@kim5398 She had mentioned that she’s an owner of the business rather than an employee. Still could have been like split dollar in the sense that they didn’t have to take the premium directly from her share of profits, but I guess her firm’s bylaws require that.
@tamimolina888 Your lawfirm was sold a bad policy I see what they tried to achieve but the problem is they inadvertently screwed y'all by doing this. And variable universal life policies are probably the worst flavor of all ULs. You need a securities license to sell those which means an agent knowingly screwed your partner's over when there were much better products he could have put y'all in. Wow that's absolutely outrageous I feel for you bro. I'm a financial advisor if Im licensed in your state I'd be glad to assist.
@javelinda What are they trying to achieve? Is this touted as some kind of benefit to partners - I mean, the person is paying for their own policy with seemingly no cost alleviated by the employer or by being part of a group.
Hard to understand why lawyers would force their partners to pay for a questionable policy.
@123thatsme I think they think it's a good investment -- they're always telling us how we can borrow against it, etc. This is actually just a very small part of the total involvement they have with life insurance schemes. In addition, it's all guaranteed issue, presumably because they're pulling together a pretty significant pool of money.
@tamimolina888 Yeah, there are certain benefits to having it. You just have to make sure you use them - such as using it to get better interest rates on loans.
If the market performs well it will end up being a net positive, however, i wonder how much of your yearly contribution goes toward investment versus towards the death benefit?
@tamimolina888 Because your partner's have no idea it's questionable. I can gaurentee you the agent that sold them this policy showed them an illustration of how much money they would have after investing in this policy for years and being all about the money your partner's were like hell yeah! The agent also went on to tell your partner's the money would be tax free which is technically true but the problem is what he didn't tell your partners the money is tax free because you have to borrow it and because it's a variable universal life policy the investment account side of the policy is invested in much more riskier assets so the illustration your partner's were shown will never pan out and it gets better because all ULs are essentially annual renewable term with as savings account, every year the premiums will increase as you all get older and you guys won't notice the increase because the difference comes from the cash value portion of the account. Eventually when the fees and mortality cost bleed your cash value dry the policy will emplode and all of you will lose everything in the investment portion of the account. Sorry to be the bearer of bad news buddy.
@tamimolina888 Absolutely! Get a term policy and open a Roth IRA, max out your Roth with the expectation your term will expire in 30 years and you will accomplish the same goal for $600 a month cheaper than you're currently paying.if you need help setting this up send me a pm.
