Do these fees seem insanely high?

[tamimolina888]

I have a variable universal life insurance policy that I'm forced to buy through my employer. It has a face value of $1,000,000. My total payment to them this year was $11,159. Here are the fees I pay every month:

$20 admin charge
$81.18 face amount charge
$2.00 other charges
$4.66 COI charge

The $81.18 per month ends up being about 9% of the $11k annual premium, which seems ridiculously high to me. Is that normal?

ETA: In addition, now that I look at the investment options, it's all mutual funds with stunningly high expense ratios -- mostly well above 50bps, and even an S&P 500 index fund is at 25bps. I guess this is small compared to the 9% fee, but it's still frustrating.

 

[cgdtaylor]

@tamimolina888 How are they forcing you to buy this coverage?

 

[tabinek]

@cgdtaylor Asking the real question.

 

[tamimolina888]

@tabinek I'm a partner in a law firm. the firm can make me do what they want. Not sure what else to tell you -- they take the money out of my share of the profits.

 

[tabinek]

@tamimolina888 That’s not terribly uncommon. Hopefully you get access to that cash value at some point.

 

[123thatsme]

@tabinek But they can force you as terms of employment? You can’t opt out for reduced salary or anything?

 

[tamimolina888]

@123thatsme They demand I buy $X of coverage in this program. It's not optional. So yes, it's part of the terms of my employment. If I want to be a partner, I do what the partnership says. It's annoying, but not worth quitting over.

 

[tabinek]

@123thatsme Well stated.

 

[vermillion]

@tabinek Sounds like a buy-sell agreement policy if it’s mandated to become a partner

 

[rayeli]

@tamimolina888 I don’t follow how you are arriving at the 9%, but at any rate, that’s actually pretty much where the fees will land with universal life.

Remember you are buying insurance - there are costs involved. You can’t compare it to fees you’d see in something like a brokerage account.

 

[tamimolina888]

@rayeli I should have explained better -- the $81 is 9% per year (81*12/11,159).

I mean, definitely I may have something wrong here -- they just tell me what to pay, I pay it, then I get a statement with a bunch of numbers on it.

 

[rayeli]

@tamimolina888 Got it - yea that’s about right.

 

[tamimolina888]

@rayeli I guess I'm surprised because there's the COI charge that seems like it's the piece for the insurance itself. So the 9% is for marketing, management, etc?

 

[rayeli]

@tamimolina888 You can think of it all as insurance charges - the COI charge is specific to actual mortality expenses I believe.

It’s funny because one of the reasons people love UL is the supposed “transparent” fee structure, but in actuality it isn’t really all that helpful, as I think you are finding out.

 

[tamimolina888]

@rayeli Does this not seem like a terrible investment? I'm 39 and healthy. My risk of dying is very small (hence the small COI). Whatever the tax benefits are, 9% seems like it must swamp them.

 

[rayeli]

@tamimolina888 Why do you own this policy? You said it’s because you are “forced” by your employer? Can you explain that?

For the most part VUL’s are, in fact, horrible investments. For any insurance product, you need to know what your needs are, and what need the policy is filling. If you are wanting a true “investment”, you probably have better places to turn to.

 

[tamimolina888]

@rayeli I'm a partner at a law firm. The firm takes the premiums out of my share of the profits. I don't think I have any ability to opt out. I wish I could.

 

[rayeli]

@tamimolina888 Got it. It’s a key person policy. Yea I mean if your partnership requires it, it is what it is.

 

[123thatsme]

@rayeli Key person policies can be paid for by the key person? It may be some weird forced life insurance, not necessarily a key person. Question is, who is the policy owner. Sounds like it’s OP

 

[wendowen]

@tamimolina888 Uhhh what math are you using for this? 9% of $11,159 is $1,004.31… not $81.18. Also, like the other commenter said, how are you being forced to buy this? That doesn’t even make sense.