by Kasey Gammons, LifeTrends Sr. Analyst
In the Indexed UL world, we tend to see a bright and sunny picture-typically very positive projections based on higher illustrated rates. Lately, this optimistic atmosphere has been further reinforced with the arrival of interest bonuses, high cap accounts, and spread death benefit options: all geared to illustrate the best income possible for risk-tolerant clients. So, while these positive projections may potentially come to pass, it is perhaps also valuable to view things from a very different lens: what would happen in the worst-case scenario. That is, assuming only guaranteed projections happen, what would a client be able to surrender the policy for at retirement? Can clients at least get their money back? We decided to investigate the guaranteed cash value at retirement to help address this question.
The outcome depends almost entirely upon age; the younger the client, the greater potential for full premium returns. For the youngest ages, there are 8 products that regularly return 100 percent of premiums, but that list shrinks the older the client. Midland National’s XL-CV5 shows the best balance of optimistic distributions and worst-case guarantees, combining first-quartile competitiveness at Maximum Illustrated Rate with strong guaranteed cash buildup. Other notable guaranteed cash builders are Global Atlantic’s Lifetime Builder, Minnesota Life’s Eclipse Indexed Life, John Hancock’s Accumulation IUL ’17, and National Life’s NL FlexLife II. These products tend to be the best options when considering guaranteed cash for almost every case; even when they don’t fully return premiums. Others provided some to little security on the guaranteed cash side. This should come as no surprise given the focus of the sale, but it is worth noting that we did see very large range of values.
Guarantee ledgers are commonly passed up when looking at cash accumulation products. The entirety of the sale won’t rest on this feature, but when two products illustrate similar income amounts, the well-rounded play could be to highlight the guaranteed cash, providing a potential financial buffer in case of catastrophic market conditions. Especially when considering the wide range of outcomes between products, a product with decent guaranteed cash value could be a worthwhile addition to the discussion.