Questions – Variable life

Questions - Variable life
by Steve Goodman

CPA, MBA – President & Chief Executive Officer

Contact Steve today for more info.

Q. What are the current investment options and their performance and fees?

  1. The investment options you choose will be the key to the performance of the policy. Make sure you get a prospectus and carefully review the investment options and the management fees charged.

Q. Is it important to run illustrations based on the investment options you’ve selected?

  1. Yes. You need to make sure the net return reflects the fees based on which funds you pick and make sure they are run based on current and guaranteed mortality costs. You also need to see how the policy performs at different rates of return. Run the illustrations at 4%, 5%, 6%, 7% and 8% gross rates of return.

Q. Can I put a term blend in to reduce commissions and improve policy performance?

  1. A few insurance companies offer lower commission products like a term blend to reduce the premium. However, sometimes this can add risk to the policy.

Q. Do products sold outside of New York differ from those sold in New York?

  1. There are variable life products available outside of New York that is not available in New York. Sometimes, these products have lower premiums or better features and/or performance.

Q. What is the target commissionable premium?

  1. This is the portion of the premium upon which the agent is paid. The commission rate is typically between 80% and 115% of the target commissionable premium.

Q. Is it helpful to obtain an illustration showing a Monte-Carlo Simulation of Return during both the investment period and income period?

  1. Using a level return every year is misleading when premiums are being paid or loans or withdrawals for retirement are being illustrated. For example, you could average 7% but based on the individual yearly returns, the overall performance can be dramatically different. Therefore, you should obtain illustrations that show different annual rates of return resulting in an overall average return of 7%.

Q.If income is taken from the policy, what types of loan options are available? (For example, fixed vs. variable interest rates?)

  1. It is very important to understand the different options available relating to loan interest rates. This could result in significant differences in policy performance.

CPA, MBA – President & Chief Executive Officer

About Steve Goodman

For more than 30 years, Steven has provided insightful solutions to the challenges of business succession, wealth preservation and charitable planning, focusing on the needs of owners of closely held businesses and high net worth individuals.

He's been featured in the New York Times and is an accomplished speaker and has presented over the years to many organizations and professional groups on efficient business succession, estate planning issues and tax strategies. Steven is a CPA who was vice president of the Trust and Investment Division of JP Morgan Chase and a supervisor for KPMG Peat Marwick, and holds an MBA from Fordham University.

Email Steve today for the business succession planning you deserve.

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