- quote -

Kenneth, there seems to be some confusion here, and I will "attempt"
to clear it up.

Every Life Insurance contract has a "cost of insurance". In a Term Policy,
the C.O.I. is EXACTLY the same as it is in a Whole Life, U/L or V/U/L.
It is no more or less expensive for the carrier to provide the coverage,
In The Form Of Risk to the carrier.

The "ancillary costs are what make up the difference. In Term, since the
Risk period is KNOWN, then those costs would be less. In Whole Life,
U/L or V/U/L, since the RISK is CONTINUOUS over a LONG period
of time, then there has to be a built-in EXTRA cost in the C.O.I.

In Whole Life, U/L & V/U/L, in order to provide for a somewhat level
premium over that LONG period, the carrier is REQUIRED to maintain
a"Guaranteed Reserve" casually called the Cash Value, to OFFSET the
obvious rising cost of that C.O.I. due to AGEING.

To get a better idea of that C.O.I., take a look at something called
Annual Renewable Term to 100. You will note that the COST will
INCREASE each and every year, due to ageing. Eventually, the
premium will amount to $999 per thousand (or similar) by age 100.
Cal Lester CLU

A while back, "Cal Lester" <cal-lester[at]comcast.net> wrote:
- quote -

A Variable Universal Life policy provides both life insurance and
investment. Cal's point about term life insurance applies equally
to the insurance component of VUL: if you pay your monthly cost of
insurance and then don't die that month, all you get in return for
your money is peace of mind.

The costs and fees associated with a VUL can be divided into three
catagories:

1) The cost of insurance
2) The cost of the investment subaccounts
3) Other costs of the policy

The cost of insurance for a VUL is much higher than the market rate
for term life insurance. The investment subaccounts in a VUL are more
expensive than low cost mutual funds.
Kenneth Almquist

"Separately: you have a wife and child so it's very likely that you
want
some life insurance. Consider that point separately though. If you
decide that you want insurance that will remain in place for your
entire
life, then you MIGHT consider VUL for that piece. But only AFTER
getting
a retirement plan for work, and tapping out numerous other alternatives

for saving."

I made sure my retirement plan was well funded prior to speaking with
an insurance agent. Two possible questions to ask this individual:

1) who would they recomend you talk to about retirement savings if what
they are intially trying to sell you is an insurance product?
2) how much retirement savings and how much insurance does this agent
advice you need?

I think the quoted text was excellent advice. I followed a similar
protocol several years ago.
I have a 401k, contribute 10% and my employer matches the first 6%, I
believe.
I have a Roth IRA and contribute $500 per month. The last 4 months of
the year this money is mine because I have hit the yearly max of $4000.
My wife contributes 12% to her 401k and has no Roth IRA.
I have two insurance policies with my wife as beneficiary. First is a
$300,000 term policy. This is to cover bills and living expenses in
event I die. We know we need my income until my retirement funds have
accumulated enough money to stop working. Second policy is a $25,000
permanant policy (to cover funeral expenses) which has a cash account
which either grows at 2% per year, or is indexed to S&P 500 if market
return is greater than 2%.
My wife also has the same two policies with me as beneficiary. We both
work and recognize the need for each other's income.

I liked the strategy of using discreet products for discreet purposes
(401k for retirement, Roth IRA for further savings, term insurance for
living expenses if I die within 20 years and permanent insurance for
funeral expenses if/when I die, regardless of age.

- quote -


The BEST answer yet.........
Cal

sugargenius wrote:
- quote -

Woody,
I'll put it this way...it's possible yours is the sort of odd special
case that makes VUL a fit, but it's not likely. VUL is by no means a
mainstream product - it's a "special circumstances" kind of thing. It's
an expensive way to accumulate wealth, and the primary pitch for it
involves potential tax advantages that very few people have a need for.

So I'd suggest throwing the question back to this FP. Ask: "What other
alternatives did you consider in coming to this VUL recommendation, and
why did you rule them out?" Then let him talk.

If he doesn't outline alternatives for retirement saving for someone who
is self-employed (such as SEP-IRA, SIMPLE IRA, 401k plan, traditional
and Roth IRAs, defined benefit plan...and perhaps a few others), I think
you can safely conclude that you're dealing with an insurance salesman
rather than a financial planner. If he has really good reasons why all
those don't make sense for you (and I can hardly imagine what they would
be) then you might spend the time to learn about & understand VUL.

But you say your goal is saving for retirement. The first cut is going
to be some kind of qualified plan for your business - you mentioned a
SEP, which allows you to defer in effect 20% of your pre-tax earnings
into an IRA, certainly look at that. And the costs have come down on
small (especially "solo") 401k plans, which allow you to defer a larger
percentage if the 20% isn't enough for you. Both of these allow a great
deal of retirement savings annually - $42,000 total in 2005, which is
probably much higher than what you maxed out as an employee. And the
cost of these plans can be extremely low - free, even.

If you have employees it's more complicated setting them up, but that
doesn't rule out doing them.

Separately: you have a wife and child so it's very likely that you want
some life insurance. Consider that point separately though. If you
decide that you want insurance that will remain in place for your entire
life, then you MIGHT consider VUL for that piece. But only AFTER getting
a retirement plan for work, and tapping out numerous other alternatives
for saving.

-Tad

"BMS" <mcfarland[at]yahoo.com> wrote in message news:8eidnYpGC9KN8_PenZ2dnUVZ_s-dnZ2d[at]comcast.com...
- quote -

I agree 1000% , nor performs any worthwhile services.
Cal Lester CLU

"Don" <dwzimm[at]telus.net> wrote in message news:LMqbf.79810$y_1.43148[at]edtnps89...
- quote -

Unfortunately too simple an answer. You assume (and you know what that spells)
that the equity would grow at a constant rate, and that the "OBLIGATIONS' of the
insured would DECREASE at a constant rate.
Not neccessarily true. Many families need MORE Life Insurance with the
passage of time (and I am NOT refering to Fed taxes).
Cal Lester CLU

If somebody shows an illustration with a 10% return, they are more
interested in selling insurance than financial planning.

I'm a devote capitalist. Nobody manages your money for free.

- quote -

"Cal Lester" <cal-lester[at]comcast.net> wrote in message
news:9aOdncCY394yuPPenZ2dnUVZ_v6dnZ2d[at]comcast.com...

\> The answer here is an ABSOLUTE NO ! ! ! ! Although you could in
- quote -

But the need for any form of life insurance would decline over time as the
value of the mutual fund grows. Of course, people without dependents do not
need life insurance at all, and accumulation of cash value would best be
sought purely through equities.

"Don" <dwzimm[at]telus.net> wrote in message news:a5bbf.75345$yS6.18224[at]clgrps12...
- quote -


The answer here is an ABSOLUTE NO ! ! ! ! Although you could in
all probability get more value from the mutual fund "outside" of a
VUL, the term insurance costs would not only mount over time, but
ALL Term Insurance has an EXPIRATION date, which may or
may nor be before YOUR expiration.

Cal Lester CLU

btw, I do NOT necessarily recommend VUL in my practice

- quote -

You might want to explain that to a widow & her children


There is no sense in investing large amount of
- quote -

The lottery ticket analogy, although it sounds cute,
is NOT valid. True there is an element of chance
involved, but that is on the part of the carrier.
We all do die. The intenet is to have the contract
"in-force" whwn we do.

Life
- quote -


Surprisingly enough, you are correct here. However,
the rub is in figuring out "as long as needed".

Cal Lester CLU

"sugargenius" <sugargenius[at]yahoo.com> wrote in message
news:1131195167.887226.154390[at]o13g2000cwo.googlegroups.com...

- quote -

My understanding is that VUL is a package of components something like a
combination of a term policy and a mutual fund. I am wondering if you
couldn't get the same protection and long term growth by just buying term
insurance together with a no-load mutual fund with low expenses. This way
you pay nothing to sales and management for putting the package together.
Another reason a do-it-yourself plan might produce more gain in the long run
is that the equity portion of VUL may be limited to a small number of funds
which have high expenses. But if you do it yourself you can choose something
like Vanguard or an index fund that will yield more in the long run and you
still have separate term insurance. Just a thought.

In article <dM6dnbz1VNmBtvDenZ2dnUVZ_vidnZ2d[at]comcast.com> ,
"Cal Lester" <cal-lester[at]comcast.net> wrote:

- quote -

I never give up because common sense does not have an
expiration date. Very few people really need life insurance,
and those that do normally need it only for a short period
of time. There is no sense in investing large amount of
money into a life insurance policy that isn't needed. Doing
so is about the same as buying lottery tickets. Life
insurance is not a product that you buy to get rich in
the event of a death. It should only be purchased when
needed, in the amount that is needed, and only as long
as needed. Paying one penny more than what is needed is
just a waste of money.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

"sugargenius" <sugargenius[at]yahoo.com> wrote in message
news:1131195167.887226.154390[at]o13g2000cwo.googlegroups.com...
- quote -


NOW, as to the original post, the question, the VUL contract is one in
which the INSURED retains the option on where to INVEST the Cash
Value Account (Guaranteed Reserve). This may or may not have
merit. I most certainly will not enter into a debate on that score. It is
really a personal choice to be made by an INFORMED Prospect, with
the aid of an INFORMED salesperson (yes we are ALL salespersons).

It is important to note however, that in general the EXPENSES involved
in the VUL contract are a great deal MORE than those in a standard U/L policy.
Again, this might be either "good or bad", depending on the outcome.

HOWEVER, what the original poster NEEDS is the services of a
PROFESSIONAL, who would determine that TRUE Needs, Wants
and Desires of the Client, and then recommend the product or products
that will "best fir those N/W/D 's.

Cal Lester CLU

"sugargenius" <sugargenius[at]yahoo.com> wrote in message
news:1131211108.342394.189260[at]g44g2000cwa.googlegroups.com...
- quote -

The fact that he is licensed with Principal Life, does not make him
a better or worse person.

Cal Lester CLU

...
- quote -


At least this poster asks questions, as to NEED..

- quote -


Notice the "probably", not a definete specific answer, since the
poster does not have sufficient info to make that descision

- quote -

Both of the above seem to make some sence
- quote -


Here, he has gone out on a limb. We have no idea as to the credentials of that FP,
therefore we should NOT castigate him/her.

btw, don't we ALL hope to receive remuniration for our time & effort?????????????????

Cal Lester CLU

John you never do give up do you?

There is no doubt that ANY term policy is "cheaper to buy",
since the Death benefit is only "in-force" DURING that
SPECIFIC period of time. If one were to DIE during that
SPECIFIC period of time, then yes it would have been
a VERY CHEAP form of coverage. IF however that person
DOES NOT DIE DURING THAT SPECIFIC PERIOD OF
TIME, then that policy has become very EXPENSIVE, and
there may be NO COVERAGE IN-FORCE AT THE TIME OF DEATH.

Cal Lester CLU


- quote -

He is with Principal Life

What are your insurance needs? Look at what you are insuring and then decide
what to buy.

For family protection and wealth transfer, insurance (probably a mix of term
and permanent) works best.

For accumulating wealth, today's VA with their benefits makes sense such as
principal protection.. If you want to take more risk, use mutual funds and
other investments.

You don't have a FP, you have an insurance salesman. Who does he work for?

"sugargenius" <sugargenius[at]yahoo.com> wrote in message
news:1131195167.887226.154390[at]o13g2000cwo.googlegroups.com...
- quote -

In article <1131195167.887226.154390[at]o13g2000cwo.googlegroups.com> ,
"sugargenius" <sugargenius[at]yahoo.com> wrote:

- quote -

No, stay clear of VUL. Yes, a SEP program would be better.
The VUL illustrations are always wildly optimistic. They
never take into account real world conditions like 3 straight
years of a down market like we saw earlier this decade. The
reason this so called "planner" is pitching this thing is that
they get an enormous commission for doing so.

If you do have a legitimate need for life insurance, look
into term policies. You will find them to be far cheaper
than these so-called permanent insurance plans.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================