Hello, Scottdan-ga:
I am a former life insurance agent here in Canada, and have a good
working knowledge of Universal Life products in general. As always,
though, a "Google Answer" should not be construed as a substitute for
the advice of an informed professional. I do not know your personal
situation or the pertinent laws of your jurisdiction.
Your best bet is to work with a recognized estate planner in your
geographical area, if you are not doing so already. It is well worth
the investment of a few dollars to have a professional help you
structure your plans. If hiring an estate planner is overkill in your
situation, your next-best option is to select an insurance person
you're comfortable working with. Get recommendations from people who
are similarly situated; friends, colleagues, business acquaintances.
Arrange to meet the most highly recommended individuals over a cup of
coffee, and sound them out in general terms.
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For the benefit of others reading this answer, I'll start by defining
a basic Universal Life policy. It consists of two parts: basic life
insurance coverage; and an investment component. There are a great
many variations on this theme, but that is the "stripped down"
description.
I'm going to address the various questions you've raised (and some
that I would raise) in roughly sequential order:
* Should I drop my term life insurance and buy Universal Life instead?
Well, it's a good option. U-Life policies are "subsidized", so to
speak, by their built-in investment component. This helps keep the
costs down, especially in the later years when the pure cost of
insurance skyrockets. If the UL policy is more expensive for six
years, then cheaper for 30, that's an easy choice.
Important point: NEVER drop your existing coverage until the new
policy has been issued.
* I am considering keeping my insurance into retirement, so it can
provide a survivor annuity for my wife.
A key point, here. Ensure that the policy you buy is enough to
generate the desired income, from day one. Living to 90 may be the
plan, but as the poet said, many plans "gang aft agley". The policy
may have to provide her with an income sooner than you anticipate, and
for longer.
Also, annuitizing the death benefit of your policy may not be the best
alternative. Annuities offer certainty, but at a cost. Other
investments may offer better returns and greater flexibility. Each
insurance carrier will have different settlement options, and this is
a key point to compare. Of course, another alternative would be for
your wife to collect her death benefit as a lump sum and invest it in
accordance with a predetermined plan. This is where an estate
planner's advice can be especially helpful.
* I am evaluating the various UL proposals I have received using NPV,
to
see which has the lowest overal cost.
Don't get too hung up on cost. Some companies offer very low-cost
products, but are not as financially stable as others. Some policies
may not offer as much flexibility in payment schedules, or may be more
restrictive in terms of when and how you take out funds. Price is
important, but getting a good product is more important.
Another point to consider: while the investment portion of the plan is
not a primary concern at this point, you may wish to "overfund" the
policy at some point by putting in lump sums (golden handshake?).
Funds in your policy will be paid out at the same time as the face
amount of your policy. The rest of your assets may spend a
significant time in probate! This is especially important if there
will be a tax burden resulting from your death. Many are those who've
had to liquidate part of their inheritance to pay the taxes!
* I figure I would need this insurance thru age 90 or so.
It's worth buying a policy that's good until death, not for "X" number
of years or until a specific age. Based on current life expectancies,
age 90 leaves a good margin of safety, but perhaps not enough. People
are living longer, more often. This is especially important if your
wife is younger than you to any significant degree. It would be a
shame to die at 91 and leave her with a severely compromised quality
of life.
* I am not so concerned with Cash Value, only that the policy has
enough to support the insurance as long as I need it.
The two are related, of course. Like any other investment, Universal
Life balances risk and reward. Guaranteed interest-bearing accounts
provide limited returns (especially in our current low-interest-rate
environment), but are eminently predictable. Other investment options
will offer higher returns, but accompanying this is the downside risk
that those investments will lose money. The better your investments
perform within the policy, the better-funded the policy will be, and
the less you may have to pay in premium. Unfortunately, if those
investments underperform badly, they may reduce the underlying death
benefit!
* Any suggestions on how to evaluate UL policies?
The range and flexibility of investments offered, as well as any
guarantees, may be the most important point of comparison in your
situation (see previous). I've voiced a few other concerns above, but
other than that you seem to have done your homework well.
Again, though, I can't stress highly enough the value of an
experienced estate planner or senior insurance person in choosing the
correct product. Most, today, are not "wedded" to a specific product
line, and are free to choose whichever product appeals to them (given
the needs of their target clientele). Professional assistance is
especially helpful in deciphering the intricacies of pension plans.
If you wish to continue researching this yourself, however, there are
numerous online quotations services. Most will also put you in touch
with pre-screened agents in your area. Here are a few representative
examples. The first has a rather decent explanation of UL in general:
http://www.1stinsurancequotes.com/universal-life-guide.htm
Insurance Finder:
https://www.insurancefinder.com/applications/app_universal.html
1 Plus Term:
http://www.1plus-term-life-insurance-rates.com/universalquote.html
Best e-Insurance:
http://www.besteinsurance.com/life/
Search Strategy:
The above is mostly drawn from my personal knowledge and product
training. However, for additional information I searched on the
following keywords:
"about Universal Life"
+"Universal Life" +quote
If you do the same, you will find as much information as you could
handle and then some.
To summarize, I believe you have selected a viable strategy. Advising
you on the execution of that strategy, unfortunately, is beyond the
scope of this forum (and my training). Good luck, and if I have been
unclear in any of the above please let me know by way of the
clarification process.
-Chromedome |
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