Video Summary
Join Colby Cox from the Life Department to learn about the differences between Whole Life and Indexed Universal Life. See why you would pick one or the other for each prospective client you come in contact with.
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I'm going to talk a little whole life IUL.
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Let me give you all a little bit, because, again, I'm still relatively new here, so
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I want to give you a little bit of background on me.
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My name's Colby Cox. I'm one of the sales directors here on the life side.
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I am Chris Newberry's counterpart, so if you've talked to Chris, I'm him, just
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I look a little different. That's about it.
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I come from an agency, so I've been in your shoes.
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I've sat at the kitchen tables with the clients.
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I've sold pretty much everything other than any type of securities
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or any type of property and casualty. I've pretty much sold everything else.
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But my bread and butter is life and annuity, specifically a lot of index
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life and index annuity.
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And a question I always get is, what's the difference?
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And
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one's not
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better than the other. Okay? It's very subjective. It really depends on the client.
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It depends on what the situation is.
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And so
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with that in mind, there is no one size fits
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all.
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But we'll talk about what are the
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benefits, what are the disadvantages, why would I pick one over the
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other. I don't want to take more than 30 minutes of you all's time.
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We're not going to talk carriers. We're not going to get into illustration
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software. But if you have any questions, please throw them in the Q&A or the chat.
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I've got both of them up, and I'll try to answer as we go through, or at
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least answer towards the end. All right?
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So again, IUL, whole life, two very
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powerful tools for permanent life insurance, and depending on your
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client's goals, their risk tolerance, their time horizons, one might
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be better suited than the other.
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When it comes down to it, trying to keep it as simple as possible,
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an IUL is really all about flexibility and performance.
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Okay?
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It's all tied to some type of index.
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That could be the S&P 500. It could be the Russell
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2000, the Hang Seng.
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Every carrier has different
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indexes within their IUL that you can divvy that money
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up to.
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But it's all about that performance.
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I'm looking for cash value accumulation.
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I'm looking for flexibility, the ability to maximum fund
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or, I don't want to say underfund because I'm not a big fan of underfunding
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IUL, but the ability to adjust premium as time
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horizons and family
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changes. That's where the IUL really comes in.
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Where a whole life is more about guarantees. It's all about simplicity. Okay?
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I want to know what my premium is. I want to know what my death benefit is.
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Hopefully, I have some guaranteed growth.
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Maybe I get dividends or not, depending on the carrier.
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But the key question is, do you want control or do you want upside?
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And that can really help you figure out what
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is best suited for your clientele.
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Okay, so let's talk IUL first, and then we'll get into the whole life.
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Like I said, flexible premiums, the ability to adjust premiums
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as time goes on. Life changes. Okay?
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Maybe I don't have the money or the disposable
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income at the beginning of my career to
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really fund an IUL like I would want, but as time goes on, with
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pay raises and things like that, maybe I can fund it more down the line, and
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the IUL allows that flexibility. It's obvious, has the index
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link growth. So the cash value is tied to
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some type of index. The S&P 500 is the most common, and
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I have not come across a single IUL that doesn't have an S&P strategy
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in there.
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But most indexes have a 0% floor, so
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zero is your hero when it comes to that IUL.
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The adjustable structure, so again, being able to have a flexible death benefit,
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whether that be increasing or level or maybe I'm
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doing some type of hybrid where I get part of my coverage permanent
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and part of my coverage as a
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term
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to be able to maximize the death benefit but not hit me in the
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pocket. And again, it's all about accumulation.
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That's what we're going for. If my goal is not to accumulate funds, the
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IUL is probably not the right place for your client.
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Okay?
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So strengths,
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higher long-term growth potential. Okay?
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You get tax advantage income strategies.
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I'm sure you've all seen a lot of people on social media talk
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about this bank on yourself and things like that.
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I don't really like to use those terms because in most,
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in companies' eyes, IUL is still life insurance first, cash
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second, okay, but it has a higher emphasis on that cash
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accumulation aspect of it. Flexibility to adapt as your income changes, make
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more money. As people grow their cash value,
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there are times where you can adjust the premium
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for whatever life throws at you. I'll give you an example.
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I've got my own IUL. I've got my kids, they're on IULs.
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During December, what I do is I usually will pay a little bit of less
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premium into my policy. I have extra disposable income for Christmas
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gifts or trips or whatever. And then in January, I go back up.
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That flexibility is what appealed to me.
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And it can be designed to be aggressive or conservative, whereas on the
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flip side of it, the performance is obviously tied to
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that index. So if you go through a couple of years where the market's not
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performing,
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you're not going to have any growth. Okay?
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You've got to be,
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I don't want to say heavily involved, but you need to be looking at your IUL on a
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year-to-year basis, okay, because strategies change, companies change.
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I've seen many carriers, they offer a certain cap for the first 10
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years, and then in year 11, they drop it.
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So you definitely have to be maintaining the
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IUL, paying attention to it. Like I said, it's
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notIt's not an everyday thing. This is not stock
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trading where I need to be paying attention to it every day, buy, sell.
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You're not doing all of that, but you need to be actively
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involved with the management of it. It's less predictable, okay?
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Because, again, that index change, it just depends on what happens as the time goes
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on. And if it's not properly funded, it could underperform
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or lapse. I've seen a lot of policies that
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lapsed at inopportune times, and it was all because the
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design of that IUL is not favorable
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to long-term
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stability, okay?
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So that's a little bit of IUL. All right? Whole life.
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Amelia, would you... Okay, one second. I got a question.
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Would address the fees associated with IUL and whole life.
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I think I talk about it, and if not, I'll answer that question as we get to the
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end. Great question.
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Whole life. All right, so you have fixed guaranteed premiums.
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Premiums never change, predictable, locked in, so your more
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conservative client probably going to like whole life.
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It does have a guaranteed cash value growth, but it's not
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designed for the cash value. It has it, but not designed for it,
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okay? And you can thank the Rockefeller family for
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ruining that for everybody. They used to fund small whole life
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policies, and they shoved millions of dollars into it.
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The IRS caught wind of it and said, "No, we don't like that," and that's why they
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put these different limits in.
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And so again, whole life is all about
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consistency and predictability.
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Guaranteed death benefit. You know as long as you pay your premiums, that death
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benefit will be there for whenever you pass away. And then dividends, okay?
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It depends on the company. It depends on if it's a stock company or a mutual
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company.
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But usually, they're pretty consistent over time.
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Most of the time, and I don't know of any whole life that has a guaranteed
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dividend,
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but for the most of the carriers that we work with, dividends have been
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consistently paid out. And so when you look at the strengths versus the
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trade-offs, like I said, maximum certainty, you get contractual
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guarantees. Simple, predictable, low maintenance.
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You're not having to worry about index strategies and monitoring, how's the S&P
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doing? How's this strategy doing?
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Because, again, you have the guaranteed factors of the whole life.
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I had mentioned earlier, conservative clients
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is the ideal person for the whole life. All right?
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And then it's great for legacy and estate planning because as long as the
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premiums can be paid, you know that death benefit's going to be there.
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Lower growth potential. It's not designed for the cash value, although it does
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have cash value
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functionality. That's not what it's designed for, where the IUL is designed for
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that cash value. You don't really have that flexibility.
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So I had mentioned IUL, there are minimums and maximums
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on the premium. And with the whole life, it's just the premium.
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Here it is, okay? Don't miss it,
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because you could lose some of that guarantee
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functions of that whole life. Slower early cash value
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accumulation, just because, again, it's not tied to the market.
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And less efficient for retirement income strategies.
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There's obviously a lot of people that push IUL as a supplemental
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retirement. I would still argue that it's still life insurance first,
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cash value second. But where whole life is, it's really all about
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that death benefit.
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Great questions, Amelia. So are dividends just return of premium credits? Correct.
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It could be. All right? It depends all based on how the
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company performs and how those dividends are based out.
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So that's why most mutual companies do dividends and stock companies don't, because
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stock companies, at the end of the day, they're worried about the stock price where
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a mutual company doesn't have to worry about it, and that's why they give those
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credits back. And then is the cash value on a whole life
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attributed? It can be, yes. Absolutely. All right?
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Now, every carrier's a little different in how they do their dividends,
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okay? So for example, there is a carrier out there that will pay the dividends in
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cash. So if the client just wanted to receive a check every year, they
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can do that. All right? I would say with dividends, most people
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pick internal paid up or they reduce
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premium. Okay? So they'll either buy more coverage with the dividends,
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or they'll use the dividends to help to reduce the
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premium over time. But again, each carrier is a little bit different in
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how they do that.
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And so when you compare head-to-head, IUL, whole life, like I
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had mentioned, I'm not going to tell you one is better than the other.
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I would say the IUL is designed for the cash value.
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It's designed for the growth. So if your client is more
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conservative and they're not looking so much for cash, go
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whole life. I'll tell you the age range is what you usually
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see. Usually, the older generations, they lean whole life.
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All right? Usually, the younger generations lean
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IUL. All right?
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Could that just be a generational thing? Absolutely, it could.
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But it just depends on the client. So if your client's looking for
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flexibility with upside potential, they want the adjustments, they want to
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be able to customize their policy a little bit more based on what's
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happening in their life today, IUL is probably the
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route to go. If you have somebody that's looking for, again, more
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guarantees, more conservability, the whole
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life is the way to go. Now, I will tell you, because you're having guarantees on
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the whole life, the whole life is more than likely, and I can't
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think of an instance where I was comparing one or the other,
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where the whole life wasn't more expensive.
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Because, again, you're paying for the guarantees. All right?
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So because I'm paying for guarantees, the carrier prices that into their
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premium. And so if you're going to just compare pricing apples to
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apples, the IUL nine times out of 10 is going to be cheaper.
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That doesn't mean that's going to be better for them.
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It just means the premium's going to be a little bit
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less.William, yes.
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Well, it should be recorded. Let me make sure.
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Yeah, I see the little record button.
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So, this will be posted onto
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the broker link. I couldn't tell
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you when. Crystal, who helps me with that, she's not here today, like I said.
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But it will be over the next 24 to 48 hours.
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All right, Jim, "Are either of them better for beneficiary receiving the cash
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values?"
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Great question. So, with the IUL,
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depending on if you go level or increasing, that's really the
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only time that cash value would come into play for the
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beneficiary, okay? So for those of you that don't know, in IUL, you can do a
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level death benefit, which means the death benefit stays the same as the
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policy stays in force. Or you can do an increasing death benefit, which is where
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you're going to take the death benefit and on top of it, add the cash value.
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So I guess in that scenario, IUL is probably
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better for receiving both the cash and the death benefit.
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But if you design the IUL on a level death benefit, they're only going to get the
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death benefit. Now, again, we're talking life insurance.
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Usually, when the cash value on an IUL reaches a certain
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threshold, the death benefit can increase over time, but it depends on
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how you design it.
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All right, Sarah, "Does one pay out sooner to families than the other?" Nope.
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No, as long as you have the policy and as long as you're
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not within the two-year contestability, you won't have issues.
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They'll both pay out the death benefit based on how that contract was written up.
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All right.
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Let's keep going. All right, so again, when comparing
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and when deciding which route am I going to go,
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again, if you're going IUL or if the client
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shows these traits, then I'd go IUL.
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Again, growth potential, all right, without direct market risk.
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Okay, this is not a VUL. A VUL is tied to the market, and you can
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make money or lose money. This you won't lose.
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You can potentially get some type of tax-free retirement income if that's a
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priority. Again, you see a lot of people on social talking
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about be your own bank, things like that,
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and most of the time, they're using an IUL.
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Again, I would argue life insurance first, cash value second.
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Somebody that's looking for flexibility in premiums or they want to customize
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it based on what's going on in their
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life at that time,
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IUL. Usually, a younger client with longer time horizons.
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With anything, it takes time, okay?
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This is not a get rich quick scheme. Some people push it that way.
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It's really all about time and how much money you're willing to put into
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it, okay?
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And then strategic design approach is preferred.
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One second, got another question.
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Andrew, we
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honestly don't know off the top of my head if we have a training deep dive into
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IUL specifically. What I'll do is I'll
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put my email, reach out to me. I will gladly sit down with you
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one-on-one or with your team if you have one,
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and we can talk about IULs in a little bit more depth.
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I know I'm high leveling it right now, and
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we can absolutely get into more of the weeds of each product, okay?
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Let me do this before I forget. I'm going to type in my email.
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All right, colbybrokerageinc.com. There it is. All right.
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Keep it, spam me, I'll gladly help you out, all right?
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Whole life, on the flip side. So again, when we're talking about
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guarantees or we want certainty, we want predictability,
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that is where whole life comes in. It's not tied to the interest,
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or it's not tied to a market-based interest
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index, excuse me. Stable, predictable asset is the
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goal. Great for estate planning or legacy focus because,
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again, with estate planning or legacy, we're really focusing on
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the death benefit, and we just want to make sure that death benefit's there when we
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pass.
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And if there's not much management going
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forward, set it and forget it,
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that's where the whole life comes in. All right.
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So I know I've breezed through this.
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Like I said, this was going to be much more 10,000-foot view,
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not in the weeds.
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Let me see if I have any other. Oh, okay, great.
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I was thinking I was at the end.
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And so I had mentioned earlier, with the IUL, it's really
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all about design. Andrew, I put it in...
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Of course, Colby.
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Well, if you were a panelist or a host, you would see my email.
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Andrew, I apologize. Let me do this one more time.
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There it is. All right, let me make sure. Do you see that one there, Andrew?
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Let me know, and anybody else, please take my email down, shoot me a
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message. I'll gladly go into more into the weeds with these with you.
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But
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the IUL is really all about design.
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Now, depending on who you talk to, everybody's going to say this is
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the superior design. What I would tell you is that it really depends on the
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client. I'll give you an example. I'm not a fan of
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increasing death benefit. I've seen too many people have an increasing death
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benefit. The costs go up over time. I'm just not a fan.
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I like level because the cost usually over time go down.
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That is just my bias and my personal preference, okay?
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But there are times where increasing makes sense.
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So with the IUL and the risk involved, the design
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is critical, okay? If
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someone comes to you and says, "I want to
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underfund
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my policy," I'd probably stay away with it because I think you're going to have
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issues in the long run. I'd rather do a term product or get
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a lower death benefit. That's just me,
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okay?And so, IUL is all about projection.
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I always tell people, "An illustration is just what could be, not what
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will be." Where a whole life, the illustration's the illustration. All right?
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Because again, you're paying for those guarantees, and it's just about
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how much am I willing to put into it, depending on how much death benefit I need.
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So the structure and the funding strategy matter much more than the actual
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product itself. And so which is why I wouldn't tell you,
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"Oh, you need to go IUL every single time," or, "Oh, no, you need to go whole life
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every single time." Depending on the situation and the client, and
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depending on what the time horizons
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and what the
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disposable income is, that could help determine which route you
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go.
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Let's go here. And so for clients that ask, "Well, which
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one's better?" Or, "Which one should I go with?" It's all about framing, okay?
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So I would make sure you note these simple words, performance
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and flexibility. That's IUL. Okay?
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I want to be able to adjust my
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policy over time based on what my life brings.
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I want the ability to put more money into it, maybe put less into it,
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depending on what happens. Okay?
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And I want to maximize that upside.
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That's IUL, performance and flexibility.
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Whole life, guarantees and simplicity. All right?
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So someone who's already getting lost in everything and getting
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lost in the IUL shuffle, maybe that's not the
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right route for them. Maybe they need to go whole life
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instead because of its simplicity, because of the guarantees.
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Like I said, premium's going to be a little bit higher, okay, because you have to
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pay for those guarantees. But certainty and
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predictability are the main factors of that whole life.
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One is not better than the other, okay?
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And again, it really depends on the client.
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So when you come across a client and they start talking to you, and if they want to
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compare whole life to IUL, please reach out to us.
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That's what we're here for. We're here to be your backbone.
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And so
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we can help you design that product to fit that needs, depending on
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who that client is and what their time horizons are.
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But I would not sit here and say, "Yeah, you have to go this way or that way." It
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really just depends. All right. Frank.
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Folks, I mean, policy endows extends into older age in case there is an existing
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mortgage insurance. Sure, absolutely.
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Yeah, I don't want to get into all the weeds with endowments and things like that.
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But when you come across, depending on what type of market you're in,
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the older generation is absolutely going to lean whole life because they want the
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guarantees. All right? And as long as the disposable income is there,
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by all means, because obviously the older we get, the more expensive it becomes,
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and that doesn't matter if it's whole term or IUL.
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It obviously across the board does that.
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But absolutely. I 100% agree that usually that older
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generation, they want that endowment.
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And if you don't know what endowment means, reach out to me.
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We'll talk about more detail there later.
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But they want the certainty that that policy's going to be there and be there when
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they need it. Okay?
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Let's see. Okay, maybe I didn't talk so much about, but I want to come back
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to Amelia's question.
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Fees associated. So,
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detractors of IUL would say, "Oh, the fees are insane." And again, my
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argument would be it's really based on design. Okay?
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If you properly fund the IUL, fees can
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go down over time. I will tell you that with IUL, most fees
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are built into the first 10 to 15 years,
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depending on the carrier. Okay? So when you see a carrier with a
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10-year surrender, that usually means their fees are built in within
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the first 10 years. And so when you compare IUL with other
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vehicles, all right, the IUL's cost at the beginning is
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going to be more expensive. But if you properly design
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it over time, it can be less. Okay?
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But again,
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it's not black and white, IUL is more expensive. This is not.
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It's really all about the design. If you properly fund it,
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and again,
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if you want to get more deep dive into IUL, call me, or like I
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said, email me. I'll get with you, and I'll show you
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what I believe is a properly funded IUL. Okay?
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But it's all about the design, okay?
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And so I'm not a fan of 15-year surrenders and carriers that offer
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15-year surrenders, because again, it extends that fee period.
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And I try with an IUL, once you get past that
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surrender period is usually when you start seeing the most growth,
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because then you don't worry about as many fees as you do have at the
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beginning.
