What do financial advisors think about universal life insurance?

Question

I was looking at MetLife Guarantee Advantage Univeral Life, and i was looking at buying it directrly from the agent not thru a fee only advisor

Answer 1

Financial advisors are going advise that you get term life for insurance in case you die and invest the difference in premiums between term life and universal life with them. They can then “churn” your investments so they make commissions. You might also make more than you would have if you put the same amount of money into universal life insurance. The operative word in that sentence is “might.” If we have learned anything from the dot com bubble or the housing bubble it is that investments—no matter how sound they seem—involve risk. You might earn more, but you also might learn less. You might lose everything. Insurance, however, is guaranteed. The earnings might seem pitiful to some, but they don’t look too bad when other investment vehicles crash. It really depends on your personality. Life insurance offers “set it and forget it” simplicity: you pay the premiums and you know in advance what the benefit will be. If you’re a risk taker, you might laugh at such an approach. Keep in mind, though, that term life insurance, even renewable, can cost more as you get older. You might even find yourself uninsurable at some point. If your family still depends on your income, you might have thought your way right out of taking care of them. Permanent life insurance such as whole life or universal life cannot be cancelled. It stays in effect until you die.

Answer 2

Base on the number of times I dealt with these so-called "financial advisors", they seem to love selling universal life insurance. Its big commissions and commissions is the only thing they truly care about. They really don't care about the client's personal finances. They are looking at how much the client can afford and from there, they will give just enough coverage that the client can afford on. If the client is looking to invest, the financial advisor would highly recommend that the client get variable universal life insurance.

But everyone knows that universal life insurance are rip offs and is the worst product out there. Its because that the cost of the insurance in universal life goes up every year. If the client continues to pay the same premiums every year and the cost of the insurance keeps going up, eventually the policy will elapse due to insufficient premium payments.

For me, if the client is looking to get life insurance, I would recommend term insurance because its inexpensive and the client can get the right amount coverage needed to protect the family's income. Then I would recommend that the client start investing their money into mutual funds because the stock market has averaged about 10.8% return in the past 80 years. Is that a pretty good return than what people get at the bank? I also help the client get out of debt as well. Who really wants to stay in debt forever?

Answer 3

Depends how it's used.  Most of the ones I work with think it's great if it's used right.  Also when you say "financial advisors", who do you mean exactly?  Fee-only financial planners, investment managers, and insurance professionals will look at this differently.  Can you be more specific?

edit: A fee-only financial advisor wouldn't be able to sell it to you because it is a commissioned product.  Though, you may want to talk with one about what your goal is with the insurance.  They won't have the same motivation as a commissioned sales person.  I like Met and I like the Garantee Adv UL (tends to be a little pricey but not in all cases); it really depends on what you are trying to do with it.

Financial Representative: How many times have you worked with a fee-only financial planner?  They can't sell commissioned products (because they are only paid directly from the client) yet recommend universal life in the right situation.  As far as I know, using term insurance for a permanent need, like solving for your estate, isn't a generally accepted practice.  And since you hate cash value insurance so much, you should be comforted that the product in question focuses on guaranteed death benefit for less money than a traditional universal life.  In fact, it accumulates very little, if any, cash value.

Answer 4

Well, it doesn't matter how you buy it - you can't "save the commission" or whatever it is you're trying to do.

I only buy term, renewable and convertable.  I think that universal and whole life are gimicky, and easy sells to people who aren't very good at math.

Before you pick a policy type, define what you want it to do.  Then, run the numbers.  Use this calculator, to compare a future value if you invest the difference:  http://www.msfinancialsavvy.com/calculat...

Usually, insurance is the MOST expensive way to invest.  Invest means, save, build cash value, collect money that YOU are going to use.  Insurance is the most effective way to leave a large sum of money behind, if you haven't built up your investments yet.  

A lot of agents here are going to disagree with me, but any kind of savings or cash value the insurance company can do for you, you can do for yourself, much, much better.  Better meaning, more money in your pocket.

Answer 5

Universal Life is a tool. If it is good or not depends on how you use it.  A screwdriver is "c**p" if you only have nails; get it?

The problem with buying term and investing the difference is most people don't invest the difference.  Term is great if you have a temporary need.

Find a Certified Financial Planner you can trust to help you decide what is right for your situation.  If the planner does not take the time to explain a few options and how they differ so you can make an informed decision, find someone else!

Answer 6

a giant ripoff!!

Answer 7

It's c**p.

The only life insurance you need is a guaranteed term policy, the amount of which should be 8-10 times your annual income (if you make $50,000 per year, you should have about a $500,000 policy).

So get a term policy--of about 20-25 years that is guaranteed, level term.

Answer 8

no way. It is a rip off and you will be advised to buy term.

Answer 9

Cash value policies of any kind (including universal life) are great for those bad at math.

The few cases where cash value or permanent policies would be best suited for can be averted by being intelligent with ones assets.

Answer 10

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