9

Apparently Genworth has replaced their vanilla term life with a universal life policy ("Colony(sm)"). The agent says the other carriers are heading in this direction too.

The premiums are equivalent to what you pay for term life. (It's actually cheaper than equivalent term life from other carriers.)

It is more complex than term life, because there's a cash value component, loans, flexible premiums, etc that come with permanent life policies. I do like simplicity. But it seems like these are optional: e.g. if you don't overpay, there is no cash value; you don't have to take a loan; etc.

Agent: "There are only advantages to this with no drawbacks."

Is anyone familiar with this breed of policy, and are there any drawbacks?

9

I'm suspicious of a universal life policy being cheaper than an equivalent term life policy. This may be true for a single vendor with odd pricing, but not for the industry as a whole.

Basically, Universal Life = Term Life + something else

That something else, whether it is savings, investment, extra perks, etc. costs something and therefore must be more expensive.

Is the insurance portion of the universal life policy a fixed rate? Or are you paying less now and more later (just for the insurance portion).

Have you gotten term quotes from other insurance agents? The easiest place I've found to do that online is Zander Insurance.

Personal experience: I had a universal life policy. They itemized the insurance cost as $20 per month and my monthly payment was $100. After 3 years, I ended the policy and got none of the cash value due to various fees totaling more than my contributions of $2880.

  • I've gotten "instant" online quotes and the price is competitive. I had the same thoughts as you -- the extra stuff has to have some cost. I was suspicious too, thus the question... They're calling it "Term UL". I have to wonder if they're planning on making money on the spread from what you might add as cash value? For what it's worth, I've worked with this agent (and agency) for other products and I have some level of trust in what he's telling me. ("Trust but verify?") – bstpierre Aug 30 '10 at 18:03
  • Sounds like you need to find the terms on the other "value added" options. – SpecKK Aug 30 '10 at 21:39
2

Sounds like a selling platform to me.

They sell you on the term component without the options, then hassle you to make overpayments to fund the optional features. Maybe they'll offer some incentive to send another few hundred bucks their way. The beauty of it for the company is they get your money, and since the extra payments are optional, you're even more likely to stop paying into it, so the company's cost stays low.

  • This sort of angle had crossed my mind too. If I can manage to avoid falling for the jedi mind tricks, it should be ok... – bstpierre Sep 21 '10 at 11:24
  • Why invite a vampire into your life for some piddly possible cash accumulation? – duffbeer703 Sep 21 '10 at 14:16

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