Prudential released a new version of PruLife Universal Protector, now noted as the (2016) version. As with many of their previous updates, Prudential applied flat rate increases to single, short and full-pay designs. Among the steady stream of reprices in the NLG market, after this reprice, PruLife Universal Protector (2016) retains most of its previous strength, despite undergoing its second premium increase of 2016.

At the beginning of 2016, PruLife Universal Protector (2013) was a steady, top-quartile product when considering shorter pay designs. Unsurprisingly then, PruLife Universal Protector experienced the highest premium increases at single pays (5%), followed by short pays (2.5%), and full-pays (≈ 1.5%). The product remains strongest in limited-pays with younger clients, but its strength wanes with middle-aged consumers and as guarantees become more limited. For younger ages (20-35) looking at shorter-payment solves, premiums will fall within 10% of the lowest-priced no-lapse guarantee product.

Of course, when comparing based on Prudential’s Age Last Birthday Advantage, PruLife UL Protector (2016) competitive positioning only strengthens among its peers.

Targets were unchanged, remaining weak outside of tabled-rated clients.

On Monday, March 14th, Symetra updated their universal life offerings, rebranding UL-G as UL-G 2.0 and CAUL as CAUL 2.0. Targets decreased for most clients over 40 and increased for most substandard clients, but premiums and accumulation patterns were unchanged. With the update, Symetra also introduced two-year rolling targets and a unique return of premium rider.

With no changes in premiums or cash values, UL-G 2.0 retains its dominance for clients 45 and older in full-pay arrangements. CAUL 2.0 is generally a middling play in the current assumption market.

Symetra is the fourth carrier to introduce or revamp a return of premium rider in the past five months. UL-G 2.0 offers a 100% return of premium to policyholders in years 20 and 25. Unlike the rest of the ROP riders in the NLG market, Symetra adds roughly a 3.7% charge to their base premiums for the rider. On the other hand, Symetra does not cap the return of the premium for non-tobacco clients, something no other carrier can boast. (Note: smokers and substandard clients are capped at 50% of paid premiums.)

Because UL-G 2.0 enjoys such solid competitive positioning for clients 45 and up without the rider, Symetra can afford to charge for the rider, remaining in or near the top quartile after the rider’s 3.7% upcharge is added to these clients’ premiums. The death benefit caps with other carriers’ riders typically only come into play for clients 55 and older, a niche among which Symetra frequently features the best premiums relative to other ROP products.

Symetra offers an enticing NLG product to clients over 40 with and without the return of premium rider. For those considering NLG products with an ROP rider, Symetra presents a very competitive option, but in a tight race, the best choice for each client will largely be dependent on that client’s age, risk class, and the value (s)he places on premium and ROP flexibility.

On Monday, June 15th, Prudential released a revised PruLife Founders Plus UL (2015). The only revision to the product was the extension of the primary guarantee, no premium or cash value changes occurred. Prudential expanded upon the already a strong primary guarantees of the product. This change results in PruLife Founders Plus UL (2015) being the best primary guarantee in the current assumption UL market, lasting to an average age of 93 for the scenarios Shaw American examines.

When looking at Founders Plus, it is important to note that it also has an indexed component. The primary guarantee is not interest rate sensitive, but is a function of the premium. To realize the full benefit of the long primary guarantee, it is best to allocate to the fixed account or at least buffer the index premium. For further explanation, if you minimally fund the product at the fixed account rate of 4.1%, premiums produce a primary guarantee averaging to age 93 (see page 2 of the Snapshots Exhibit). If you minimally fund it at a higher assumed interest rate, such as 6%, the lower outlay produces lower primary guarantees averaging to age 78 (see page 4 of the Snapshots Exhibit). When compared to the current primary guarantee leader for IUL (Protective’s Indexed Choice UL), the guarantees fall about 10 years shorter, with much less cash and some better/worse premiums.

All primary guarantee data for the current assumption universal life benchmarks were added on Wednesday, June 17th. Note: by the end of the summer, you will see primary guarantees added to the indexed universal life benchmarks.

Click Here for Snapshots Exhibit

"Retirement Planning"All of us know that life insurance was designed to protect our loved ones in the event of our untimely death. Life insurance can also be purchased as part of estate planning or to protect a business so that it can continue to operate in the event of the death of an owner or key employee. However, it does seem that the insurance industry believes that buying a life insurance policy in one form or another is a cure for financial ill. This is according to an article featured in USNews.com.

Sometimes it seems the insurance industry believes that buying a life insurance policy in one form or another is a cure for any financial ill. To be clear, life insurance is a part of many properly constructed financial plans. Many of us need to provide this protection for our families in the event of an untimely death. Parents, and anyone who provides support for someone else, might consider life insurance protection.

Life insurance can also be used for estate planning purposes or as a vehicle to ensure that a business can continue to operate in the event of the death of an owner or key employee.

My beef, however, is with life insurance marketed as an investment, most often as a retirement investment vehicle. To say the life insurance folks are inventive and creative marketers is an understatement.

A typical scenario.

Life insurance is often marketed to high-earning professionals and business owners as a means to put away additional funds for retirement over and above any type of retirement plan they might already have, such as a 401(k).

The pitch is this: buy a policy with underlying investment vehicles that will build cash value over time. The client funds the policy for certain number of years and the growth in the cash value will eventually negate the need for additional premiums. At retirement the client can withdraw cash as a tax-free loan for retirement. The loans never need to be repaid and the only consequence is a reduced death benefit.

What could go wrong?

While the above scenario can work, it is far from the “slam dunk” opportunity portrayed by some agents and other financial salespeople. Among the things that could derail this strategy:

  • The investments don’t perform as well as assumed in sales illustrations.
  • The policyholder can’t fund the policy to the level anticipated.
  • The policyholder withdraws too much cash from the policy and triggers a taxable event.

Additionally, investing under a life insurance wrapper can be terribly expensive and there are generally surrender charges written into such policies that can make it very expensive to get out of a policy early or convert it to another saving or investment vehicle, often for a number of years.

Consider alternatives.

If you are pitched a plan to use life insurance as a retirement investment make sure that you have reviewed and exhausted all other alternatives first, including:

  • Fully funding a qualified retirement plan including a 401(k) or SEP-IRA.
  • Starting a pension plan for yourself. This includes a cash balance plan.
  • Funding a low-cost, no-load variable annuity.

Even if you find that this life insurance strategy is the best course of action make sure that you shop policies and companies. You will want to look at the quality of the underlying investment and understand all underlying fees and expenses.

If you buy a policy, make sure that you continue to monitor it. Set aside money to fund it, watch the performance of its underlying investments, and be sure withdrawals won’t a trigger a tax penalty?

Life insurance can help provide financial security for your family. However, if you buy it for any reason other than the death benefit, make sure that the policy fills the alternative role in the best possible fashion before writing your first premium check.

The typical scenario is that clients buy a universal life policy that builds cash. The policy is designed so that it’s funded heavily in the early years and then at the time of retirement the cash value is withdrawn. The cash is withdrawn as a tax free loan. The loan does not have to be paid back but the death benefit is reduced.

This scenario could work but all things need to be considered when using this plan. What if the investment doesn’t perform as well as expected? Perhaps the client can’t fund the policy as anticipated. Or the worst of all, what if the client withdrawals too much money and it triggers a taxable event. Clients also need to consider that most policies have surrender charges written in and it can be expensive to get your money.

If your planning to use a life insurance policy for retirement make sure that you look at all your options first. Keep in mind that IRA’s and annuities are designed to be used as retirement investments.

Lastly, if you decide to purchase a life insurance policy make sure that you shop around to several companies and understand the investment as well as all of the underlying fees and expenses. Once the policy has been issued make sure that you monitor it on a regular basis and set aside the money needed to fund it.