Commission
- Thread starter bigbone
- Start date
I was in this business years ago. This is a complete rip off. Universal life is whole life insurance in a different package. As a rule of thumb, never purchase insurance with investments as a combination. They won't tell you the commission because they don't even know. My advice is buy term insurance based on your needs, and handle investments separately.
B
burt-oh-my!
You are GENERALLY correct except for certain tax aspects of universal life insurance which can make it a better choice for passing money on to the next generation.I was in this business years ago. This is a complete rip off. Universal life is whole life insurance in a different package. As a rule of thumb, never purchase insurance with investments as a combination. They won't tell you the commission because they don't even know. My advice is buy term insurance based on your needs, and handle investments separately.
bigbone, are you a doctor? Doctors go crazy for tax-favoured investments. They will happily pay two dollars to save a dollar of tax.
I too was in the business, and agree that this is not typically a good investment. Fifteen years ago, some of these policies would pay an up front commission of 110%. yes, that's right. 110%. I wonder why these investment guys push these products so hard...I was in this business years ago. This is a complete rip off. Universal life is whole life insurance in a different package. As a rule of thumb, never purchase insurance with investments as a combination. They won't tell you the commission because they don't even know. My advice is buy term insurance based on your needs, and handle investments separately.
Icedog probably worked for the Primarica cult who rant this stuff as they are too ignorant to research. A UL, fully pre paid or not, can be the right choice in certain estate planning situations. There is a fixed cost of insurance, and the option to invest tax sheltered over and above that. You can borrow against that money and that is considered tax free. All the investments get paid out tax free, upon death, in addition to the insurance amount. For the right person, this is a good tool. If it is a good tool, the commission should not matter. Bigshot is only partially correct. The commission is about 110% on the cost of the annual insurance premium, and usually about 3% on the funds invested/deposited over and above that. So your broker will not earn 220K on a 200K deposit. PM me if u need more info.
correct me if im wrong....isn't a universal life policy just a yearly renewable term with an investment vehicle? the policy fees and all sort of hidden fees are horrible on those things and are rarely beneficial to about 99% of the population. obviously there are tons and tons of different types of universal policies out there and will cater to what the flavour of the month is based on what the fad is and what they can package together to get people to buy it. but at the end of the day, i rarely ever saw it being worth it. i worked at BMO Nesbitt Burns for a few years and I had to look over a lot of these policies, though i can't say i'm an expert on it because i'm not because it was a small portion of what i did at work.
personally...regardless of tax sheltering and so on...chances are, the cost of the insurance and the fees will be expensive. there are many other ways to shelter your money b4 you even get around to the universal policy. lastly...if you actually need to borrow money from your life insurance...well...ur probably screwed financially anyways....and chances are...this product is probably not for you.
here is a thought...and im basing this on atlantica's numbers...so i can't confirm this to be true or not......if the agent's commission is 3% annually?(atlantica..plz confirm the structure of the investment commission or else i'm just going to use the worst case scenario in my example)....what would the money manager's commission be? then...what would the company's cut be? sounds pretty high...
once again...i don't have the details cause i dont have a universal policy to look at...but i'm assuming atlantica does so please enlighten me on the universal policy. thx
personally...regardless of tax sheltering and so on...chances are, the cost of the insurance and the fees will be expensive. there are many other ways to shelter your money b4 you even get around to the universal policy. lastly...if you actually need to borrow money from your life insurance...well...ur probably screwed financially anyways....and chances are...this product is probably not for you.
here is a thought...and im basing this on atlantica's numbers...so i can't confirm this to be true or not......if the agent's commission is 3% annually?(atlantica..plz confirm the structure of the investment commission or else i'm just going to use the worst case scenario in my example)....what would the money manager's commission be? then...what would the company's cut be? sounds pretty high...
once again...i don't have the details cause i dont have a universal policy to look at...but i'm assuming atlantica does so please enlighten me on the universal policy. thx
With bonusing the brokerage would make upwards of 160% of first year premium. One thing people should always remember is that the claims cost of dying is always the same no matter the policy type meaning term or universal life. When you buy insurance your betting your gonna die while the policy is in force so the important thing is to have the insuirance when you need it so term is a bigger gamble if you live too long and can't afford it at a higher age or if you become uninsurable. Just as a side note you ever wonder what the markup is on that new suit just bought?
hey Soulsphere, the 3% is first year only. Kinda similar to a DSC mutual fund. The trailers are generally minimal and turn to zero after a couple of years. UL's can be set up w a locked in permanent cost, similar to a Term to 100. Most are set up a lot more transparent then they were in the past.
Most people don't need to be covered by life insurance when they are older. At an earlier point of my life I was supporting my wife as she went back to school for an advanced degree. At that time had I died she would have not had the money to continue and lost the opportunity and been forced to work. So I bought five year term sufficient to pay for her schooling if I died. Now that we're both working, and we have savings, it's no longer needed.
In my view although I did not die and never collected on the term insurance it was the right thing to do. Now that I've got savings, who needs life insurance? If I die now my wife gets access to life savings meant to support two people, even though she's only one person.
In my view although I did not die and never collected on the term insurance it was the right thing to do. Now that I've got savings, who needs life insurance? If I die now my wife gets access to life savings meant to support two people, even though she's only one person.
/agreedI agree whole hardly with your comment here. Insurance is a risk management tool that should be in place in families so that a standard of living can be maintained with the loss of an income. Unfortunately some people look at it as a lottery ticket lol. While I disagree with Fugi about the need for insurance in the circumstances he described, I do acknowledge that this risk management tool is personal choice based on personal circumstances.
A good Financial Planner, one not blinded by the commissions he/she will recieve, can easily calculate the Income replacement value and how much insurance you need to maintain a lifestyle in a two income family to protect against the risk of one income being lost.
KF
