Monday, November 14, 2005

Variable Universal Life Insurance

Finally, I received some word back from One National Life Insurance that was bought through a representative from the MONY group. I went through the medical exam a few weeks ago, that consisted of loads of medical history inquisition (:D), a blood test (twice because I'm supposedly hard to draw blood from), and a urine test. I guess they didn't find anything exciting about me because I got the standard rate for the variable life insurance.

The monthly payment is quoted at $ 96.00. This rate will not change with age or medical problems in the future ( which I know there will be loads of, with the way things are turning up). The money will be tax-deductible and will be invested in a few mutual funds or annuities. I don't have the list of investment options yet. If the investments do well, you can opt to pay for the insurance premiums with the profits you make from the investments. The principal amount of the balance would be available for withdrawal at any time. The growth of the money in the account will grow tax free until, of course, you take it out.

I wonder if it would be a wise option to use or view this life insurance account as a forced savings account that has a growth feature with compound interest with the benefit of having your life insured for $250,000. But then, I've heard that this is not a very wise thing to do as well.

I haven't been able to update frequently during the last week due to this week being the exam week. Have exam on this tuesday and wednesday..I really hope I pass!

Also, I found out today that my work only pays for $1,500 per fiscal year for tuition reimbursement!!! That's pretty low. But then, it's better than nothing!

5 comments:

  1. Anonymous9:13 PM

    I've heard a lot of bad stuff about VULs, do you know what kind of fees and front load charges they are getting from you?

    What's the annual expense ratio expected to be?

    ReplyDelete
  2. Jon,

    There havn't been any fees or front load charges for this so far. I believe the insurance company paid comission to the financial advisor from whom I bought this from.

    The annual expense ratios will depend on what type of investment I choose. I will be getting the full packet in the mail soon and will be able to update more on this.

    Belasarious,

    "Why would a relatively young woman with no dependents feel she needs insurance?" : A kind of long-winded and complicated answer for this. But it all comes down to the "what if". I admit it was a rushed decision making process. I knew that after the whole medical diagnosis thing gets figured out and put on my medical records, my premiums would be very high. Especially, if there's a record of cancer or tumors or something of that kind. Although I don't have any dependents now, I might have in the future...hopefully. If I only start the payments then, the premiums would be very high due to the medical conditions that would have been recorded by then. At least that was the reasoning behind getting life insurance now, :)!

    I didn't get term life insurance based on the same reason as well. Your suggestion about the I bonds is very worth looking into and one I should do more reading up on. Thanks!!

    Wow, long comment post. I hope it made a smidget of sense.

    ReplyDelete
  3. Hi Bel,

    The insurance is for $250,000. If I were a clean and healthy 27 year old, I probably would not have done this insurance thing. The case with your poor wife having had to pay since 25 years ago for a $20,000!!!! If you think about it, really, if i'm the soul provider for dependents in the future, $250,000 is probably not going to cut it either!

    How do I figure out the opportunity costs for the $1200 per year? Hmm Need to find out and I feel a post coming!!

    ReplyDelete
  4. VUL carries a great deal of lapse risk given the potential volatility of market returns.

    If you have an insurance need, it would be more safely and more cheaply fulfilled through pure insurance,i.e. term insurance.

    The following articles by fee-only financial planner Peter Katt will give you an objective, unbiased assessment of the risks and uses of VUL.


    The Do's and Don'ts of Buying Variable Life Insurance Policies (1999)

    Using Variable Life Insurance As an Investment Alternative (2000)

    Variable Life Insurance Policies and Stock Market Volatility (2001)

    Variable Life Insurance: Be Wary of Policy 'Delusions' (2003)

    Using Monte Carlo to Assess Variable Life (2005)

    Hope this helps,
    Barry

    ReplyDelete
  5. Hi, good to see your article here, people usually don’t catch good things with insurance agents but I always try to sit with them and explain everything whichever is necessary. I read insurance blogs on daily basis because it keeps me alive and help me think that I am not alone insurance field. I am working in orange country insurance company.

    Orange County Insurance

    ReplyDelete