Posts Tagged ‘insurance’
A few weeks ago, I told you about Jon, a long-time reader of my newsletter. His Edward Jones financial advisor was trying to sell him a Variable Universal Life (VUL) policy, and he asked me for my 2nd opinion. Instead of writing my opinion, however, I posted his question to my newsletter readers, and asked you guys to make an assessment.
A few of you came back with the answer of YES since the $2mm death benefit is huge, and the annual premium payment of $17k appears to be quite reasonable. On top of that, the buyer gets the flexibility to skip payments as well. I believe this view of the product is exactly what the insurance company wants but it is misguided.
To answer Jon’s question, I first talked to him to determine his family’s actual need for life insurance. He has two teenage kids and he and his wife already both have 20-year term life insurance policies, each with a $2mm death benefit. They clearly have no need for additional life insurance.
Now let’s look at the product itself. A VUL policy is a combination of two components – life insurance and investment. The product is not entirely under the oversight of the SEC, therefore there is a huge regulatory loophole that the insurance company can use to take advantage of the buyers.
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A client of mine bought a fixed rate annuity a few years ago. She was told by the agent that it’s just like a savings account, only with a higher interest rate of 3%.
Recently, we took the money out in favor of a better investment, and boy was she in for a shock! There was a $17k surrender charge and nearly $3.6k in tax withholdings. All the interest she supposedly earned in the annuity went to the surrender charges, and now she has to pay income taxes on that interest!
Here is why a fixed rate annuity is nothing like a savings account.
1. A savings account is FDIC guaranteed, in other words, it has the full faith and credit of the US government behind it. A fixed rate annuity is NOT FDIC guaranteed, it only has the credit of the issuing company behind it. Think AIG! Read the rest of this entry »
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Obamacare: Sh*t Hits Fan
Posted on: November 13, 2013
Today I sat down with a bunch of professionals for our quarterly wealth management meeting. As the talks turned toward the implementation of the Affordable Care Act, I realized the mal-functioning website is the least of its problems.
In our group there is a professional, Andrea, who specializes in helping small to mid-sized businesses procure group health insurance. Andrea said insurance companies are cancelling old plans and giving their customers “upgraded” plans that cost more and provide less benefits.
This hasn’t just been happening in isolated cases, but is rather wide-spread. Why? For one, the ACA has many mandates, such as covering reproductive health. So if a man’s insurance plan does not cover a pap smear, he just lost his plan! OK, I made this up for comedy, but Andrea did mention a 55 year old woman losing her plan because it did not have maternity benefits.
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