Question : How is does variable life insurance work?
I went to an AXA financial advisor to plan for my retirement and he insists i get an flexible variable life insurance policy from AXA? Anyone have this insurance from AXA and how does it work? I personally want to put money on IRA's, but he is saying this is a better option for me. I am 29 and single. What do you think?
- asked by Poorboy
All Answers:
Answer #1
One reason he would want you to put your money ina VUL (Variable Universal Life) policy is becausehe makes higher commissions on a VUL than he wouldan annuity, mutual funds, stocks, etc.If you are29 and single, you do not necessarily have theneed for a death benefit which would be associatedwith a VUL, other than planning ahead for thefuture.You also want to be careful with VUL'sbecause the interest rate that they illustrate toyou is not a guaranteed rate. You could get 5 or10 years down the road and then suddenly youaren't paying enough premium and have todrastically increase your contribution in order tokeep the policy in-force (active).If I were you, Iwould put the funds into a Roth IRA. Roth IRA'sare not tax deductible like traditional IRA's,however they grow tax free and when you take thewithdrawals at retirement, they are tax free. There is a $4,000 annual contribution limit to anIRA. (Which could also vary if you have aqualified plan through your employer) Thedownside to this is that you cannot take the fundsout until you are 59 1/2, without payingpenalties.I would definitely research furtheroptions before committing to a VUL. If possible,try to find an Independent Financial Advisor inyour area. Independent Advisors tend to befocused on your needs rather than pushing only theproducts that their company offers. Hope thatHelps.
- answered by angelabryant921
Answer #2
VUL's are laden with fees. If you need lifeinsurance, buy term insurance to cover your needs.If you need to invest for retirement, invest ingood solid mutual funds inside of an IRA. NEVERMIX LIFE INSURANCE WITH INVESTMENTS!!!! In somestates it's actually illegal to even associateVUL's with retirement plans.With cash value lifeinsurance, in most cases, if you die the insurancecompany keeps the savings and pays out the deathbenefit. If you borrow a loan against the cashvalue, you have to pay interest on YOUR money.Plus it is deducted from the death benefit atdeath. So you pay for both savings and protection,but only get one.I know they can make it soundgood, but make sure you do the research.The FTCeven did a study on cash value life insurancescams. They concluded that the average rate ofreturn for a whole life policy was 1.1% after feesand commissions. Yeah they may tell you itaveraged 9.2%, but that's before fees andcommissions. Don't listen to the idiots that sellthis crap.
- answered by Termite
Answer #3
Not to be a jerk, but that financial advisor is anidiot. Actually, he's not an idiot, he's trying tomake bunch of money by selling you a lifeinsurance policy. I guarantee you he doesn't own avariable life policy. Maybe he doesn't have lifeinsurance at all.This is how a variable lifepolicy work. You pay your premiums. A portion ofyour premiums goes toward life insurance and therest is invested in the stock market. There is noguarantees that your cash value will grow.Investments by themselves have their own operatingand management fees. Life insurance has its ownfees as well. Now you combine these two productstogether, you are now paying bunch of fees!If yourcash value does grow and you die someday, yourbeneficiary will be paid a death benefit that isalmost equal to the growth of the cash value. Ifyour cash value does poorly, you are guaranteed aminimum death benefit of what you paid for.If youever wanted to take money out, you would have toborrow it and pay a loan interest on it. You willaffect the death benefit above the guaranteedminimum. If you cancel the policy in the future,surrender charges will apply on the cash value.Ihave seen many life policies and I have never seena life insurance policy getting a great return onthe cash value. The highest rate of return I eversaw was 6%. Most of the time, its between 2% to4%.If you want life insurance because you have afamily that is dependent on your income, get a20-35 year term insurance. If you want to save forretirement, open a Roth IRA (if you qualify forit). If you have a job that has a 401(k), I wouldput money into that too. If you put the sameinvestment in a life insurance policy and in anIRA account, the IRA will out perform the lifeinsurance policy.Anyway, you are making the rightchoice by considering an IRA. Don't listen toagent or advisor or anyone who recommends lifeinsurance as a retirement vehicle. Life insurancemain purpose is to provide income to yourbeneficiary so that he/she can maintain the samelife style. (though, many people who own lifeinsurance don't have enough coverage)
- answered by Doing the Right Thing
Answer #4
HAHAHAHA.....All of the folks that just answeredabove, particularly the one right above me islost! They argue for you to do your research yetthey have failed to do theirs. There are over2000 different life insurance companies out there,and there are ONLY three that you should beworking with: Northwestern Mutual, MassMutual orNY Life. The reader above said that he has neverseen a dividend above 6%? (I recommend you doyour homework). Try reaching for a NorthwesternMutual policy that is currently yielding 7.5%, andtheir 20 year average is just over 9.2%. Wholelife contracts with one of these three companiesare fantastic, yet you should not be putting allof your eggs here: roughly 3-7% of your grossincome into these policies. Now, your AXA buddyis pushing a VUL policy because his company returnSTINKS!! (Thats the homework that you need todo). Ask him, why not a whole life contract, andask what that number is! VUL's are not bad, buttraditional whole lifes with one of the threecompanies mentioned above are much better. Pleaseconsider, and do not listen to these jabroniesdown here that are being ill-advised due to the1,997 other bad companies out there corruptingtheir view.
- answered by runnin_rebel07
Answer #5
Number one, this is a highly questioned topic, trysearching for other questions that people haveasked before.Secondly, I'd think that "buy terminvest the difference" would make sense for mostsingle 29 year olds, but we don't really knowenough about your situation to give advice. Thosethat pretend are only pretending or they only takeone strategy with all their clients.Third, If acompany is paying 7% now and that dividend ratehas gone down in recent years, would you believethat you are more likely to get 9% or 7%? Adividend cannot be guaranteed much less it's rate. If you took out a money market which can changeits rate at any time, would you care what the 20year average is? I'm surprised Guardian wasn't onthat list by the way.Fourth, all that Axa guy hadto do to be called an "advisor" is to go work forAxa as an agent. The name of their broker-dealeris Axa Advisors for goodness sakes. The term"financial advisor" is unregulated in mostcircumstances and thereby is fairly meaningless inmy book. It sounds like "financial planner", butit is not the same.If a VUL is right for you,(please note that the mortality and administrationcosts can change at the company's whim and thishas nothing to do with the financial strength ofthe insurance company making your interest rateonly half of the story) there are other goodoptions out there besides Axa. Prudential, JohnHancock, Transamerica, Pac Life, and lots ofothers have great policies too. Does that makethis guy's recommendation suspect? Sure,especially since he has a contractual obligationto send a certain amount of business their way andis heavily incentivised beyond that point. If youwant real advice, go see a "financial planner" -one who thinks their advice is worth your money. Otherwise they are just shooting from the hip totry to sell you something.
- answered by aaron p
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