Met Life Annuity 4% guaranteed interest

[ncbill]

Not necessarily, it depends on how much it is currently funded... the policies are typically designed so that if you pay the recommended premium that the policy account value grows sufficiently so that later in life it is sufficient, along with interest, to fund cost of insurance charges and admin expense fees.

It is true that if one fails to pay the recommended premium that later the account value is inadequate (underdfunded policy) and eventually the policy will expire.

Only under the projection that your agent will by happy to show you.

Look at the guarantee instead.

All the UL policies I've had have collapsed to the guarantee and imploded.

 

[Independent]

Cost of insurance is recalculated annually on universal life policies.

So the policy will eventually blow up unless you put in more cash.

IMHO, these are sold because at the beginning their premiums are much less than whole life.

The cost of insurance is a monthly term premium times the difference between the death benefit and the account value (aka the "net amount at risk").

IF the buyer selected a level total death benefit, and the account value is currently growing, then the NAR is shrinking.

The premium rate per thousand goes up as you age, but the NAR goes down. It's perfectly possible that the shrinking NAR outruns the growing premium rate and the account value continues to grow. It all depends on the current account value and the credited interest rate.

The owner can ask for an inforce illustration, based on the guaranteed interest rate and the current term rates, to get an idea of which way this one is headed.

 

[pb4uski]

^^^^^ Excellent point that I had totally forgot about!

I suspect that ncbill probably selected Option B since his UL poilcies imploded.

 

[CRLLS]

That totally false. If the policy is being used to pay the premium, even ifthe net increase is 3% he is still earning 4%.

An example...account value is $10,000 and earns 4% and annual premium is $100. Account value of $10,000 at beginning of year is $10,400 at end of year with interest.... after deduction for $100 premium the account value is $10,300.

The policyholder still earned 4% (the $400 of interest)... they just chose to use some of that interest to pay the premium rather than write aheck.

Well, you are right, of course mathematically. But from a different perspective, the cash value at the end of the year is only $300 higher, not $400. The difference of $100 was spent on insurance. Many of us, at least myself, no longer need the insurance part of the package to provide security to our loved ones. Ignoring the insurance part of it for a moment and comparing it as an "investment" against alternative investment opportunities, he earned 3%. Better returns can be made elsewhere IMO.

 

[ncbill]

^^^^^ Excellent point that I had totally forgot about!

I suspect that ncbill probably selected Option B since his UL poilcies imploded.

Didn't actually select the policy (just got stuck paying for it) but it's clear the reason they're chosen is because they're cheaper than plain-vanilla whole life...at first.

Once a few decades pass you find despite the original projections the insurance cost is far exceeding any accumulation to the point the cash value is depleted...so you either put in significantly more money, or are forced let the policy lapse.