Universal Life Insurance, Part 2 – The Good, The Bad And The Ugly
Dave Frucella • May 7, 2019
This is Part 2 – You can start at the beginning HERE
<< Part 1 - Part 3 >>
About Universal Life Insurance Policies
History of Universal Life Insurance
Over 40 years ago, I sat in a former employer’s class anxiously waiting for the product that was going to revolutionize the life insurance industry. It was called Universal Life. It was a product designed to pay current interest rates on cash values (then 15%). Combined with a low mortality charge and low administration costs, everyone that bought the product would be millionaires. It was sold as the solution to every financial problem. As I mentioned above, many major financial magazines glowed about it (I think they may have burned all the unsold issues).
Back in the 1980’s, I’m not sure the insurance companies really wanted to introduce this product, but the outcry by the consumer groups was getting too loud for them to ignore.
In the late 1970’s, things were changing. Consumer groups, led by Ralph Nader started picking on the insurance industry, telling them their products were terrible. The companies were selling outdated, over-priced contracts that mainly consisted of very low interest whole life. The public demanded higher interest crediting of their cash values. As a side note, Term life insurance was almost non-existent at the time, and what Term was available, was grossly overpriced.
The industry had a dilemma. Their cash cow product, whole life, was under attack. Interest and inflation rates were sailing along almost at 15%. Now one thing the industry didn’t want to do was to offer a product that offered great interest rates on the cash value and still give the guarantees that whole life offered. There was simply too much risk for them to absorb.
They made a compromise with the critics and the public. They said, “we will give you the higher interest rates you want; however, we want you, the consumer, to share in some of the risk.” So they came up with a modified variation of their old long-standing product, Whole Life and called it Universal Life. It un-bundled some of the inherent guarantees of Whole Life. Universal Life left the consumer wide open to new risks and the possibility of having their insurance canceled.
What is Whole Life Insurance?
To understand Universal Life, you need to understand Whole Life. The best way to explain Whole Life is this: You pay a set guaranteed premium for life – the company will give you coverage on your life (for life) for the amount you chose – the policy gives you paltry cash value – the company holds your cash value, invests your cash value and makes lots of money on it and pays you almost some interest in return – so you get to make the company a zero interest loan and you get some insurance – in other words, you get screwed – got it? Now if you don’t think that’s true, why do insurance companies own half the world?
So from a historical perspective, you can see why, in the 1970’s, that people were upset with the insurance industry.
Questions? Comments? Suggestions? 1-800-542-5530 – admin@americaquote.com
Best Life Insurance Companies: Who Are They? The answer to that question is: “it depends.” If you are a non-smoker in good health, you should see most of the following companies towards the top of any worthwhile spreadsheet. If not, you may want to move on. Over 1,000 companies sell term life insurance so the focus here is the highest-rated companies offering the lowest prices. The listed companies are committed to the term marketplace. From time to time, we see other carriers move into and soon after quickly move out of this arena. It’s tough to be profitable and the company needs to know what it’s doing. These carriers have demonstrated their expertise. The current low-priced non-smoker leaders are: American General Life Insurance Company Banner Life Insurance Company John Hancock Life Insurance Company Pacific Life Protective Life Pruco Life Insurance Company (Prudential) William Penn Life Insurance Company (NY only) For Alternate Tobacco Users (Cigar, Pipe and Chewers), John Hancock or Pruco usually can’t be beat. For cigarette smokers, American General and Banner are usually in the top bracket. For non-smokers with weight problems, prices are all over the board, but Pruco has very generous limits. Family history problems are covered on the “Underwriting Guidelines” page. Best Life Insurance Rates: Call for Help Now I’ve only hit the high points here and can’t cover every situation. There are other companies not listed above that we use in special situations. If you have any health or lifestyle issues, I recommend you talk with an experienced agent (who is licensed in your state). If you’re talking with someone with an Internet company, ask him or her to fax you a copy of his or her individual license to sell in your state (not the company’s license). That way you know you’re not just talking with a telemarketer. A telemarketer’s only goal is to get your application started, regardless of company or underwriting criteria. This may seem harsh, but it can save you thousands of dollars. Questions? Comments? Suggestions? 1-800-542-5530
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This is Part 6 – You can start at the beginning – HERE «Part 5 Who Should Consider Buying A Universal Life Policy? Is Universal Life Insurance right for you? I have a problem when people call me and tell me they paying $50-100 per month for a Universal Life policy because they bought for […]
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Because insurance premiums can vary widely (as much as 300-500%), you should always get quotes in writing from multiple respected companies. AmericaQuote represents America’s top insurance companies. When you fill out our Instant Life Insurance Quote form you will get multiple quotes from the companies that offer the best and
Are the companies you are comparing small subsidiaries of larger parent firms? This is a very important. Many large companies are forming alliances with smaller companies to sell specialty products, such as term and term-like insurance.
Which to Buy?
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How To Save Money When Switching Life Insurance Companies
One well-known insurance company has flooded the airwaves with this promise: “Give us 15 minutes and we may be able to save you 15 percent on your car insurance.”
I am drawing special attention to the phrase “Guaranteed Renewable” in life insurance contracts because it is easy to misinterpret. When heard in a TV commercial: “Our policies’ rates are guaranteed for the first 20 years and are guaranteed renewable thereafter to age 100”—or something similar.
When I fly out of Charlotte's airport, I don’t use valet parking. It’s convenient but very expensive. Instead, I leave my car in the inexpensive satellite lot and take a free shuttle to the terminal. One is easy and very expensive, the other is a little bit of trouble but less expensive.
My slow awakening may save you piles of money.
In 1974, I went to work for a major insurance company. They offered the usual package of benefits - health, dental and life insurance. They gave me one times my salary for free and I could buy up to four times additional