There's cost associated with the policy itself, administrative and the actual cost of the death benefit. Those are probably based on current cost, interest rates and the amount you are paying. The assumptions may include a different premium amount, interest rate etc. It sounds to me as though they are saying they guarantee as long as you continue to make your payments and make no changes to the policy that it will stay in force until the date they give you (15 years). On the other hand to go further than the 15 years, maybe they have increased the premiums, the interest rate etc. to enhance the length of time the policy will remain in force. Is the product fixed or variable? Just curious why you went with the universal life policy?

First off, you need to decide what you want insurance for. Some of the reasons could be: - Income replacement for surviving spouse - Mortgage payoff - Children (education, etc.) - Retirement Level term is usually the least expensive method of obtaining insurance. Term periods are usually 10, 15, 20, 25, or 30 years. Companies that specialize in this market include Metropolitan, Transamerica, USAA Life, and West Coast Life; there are many others. Use a company with a sound financial rating, of which there are certainly fewer than there used to be, LOL. Income replacement: up to you to decide how much would be adequate recompense for a spouse's death. Generally it's recommended to have 5-10x gross annual salary, but your needs may be different. Mortgage payoff: self explanatory. Get a level term policy for each employed person on the title, for the 15 or 30-yr term of the mortgage. Children (education, etc.): again, self-explanatory Retirement: In our case, I have insurance as a retirement backstop. My DH has the old-fashioned Defined Benefit Pension that is assignable to the spouse, along with a good-sized 401k/457 account. I, OTOH, have only some small annuities that kick in when I'm 65, and a very tiny IRA. I use life insurance to mitigate the risk to him that if I die before I start collecting (he would get nothing, in that case) this offsets the loss of that monthly income for a number of years. Be aware that you need to be careful if the reason for purchase is estate planning. As most estates fall under the Federal Tax Limits, the majority of folks do not need an insurance policy for estate tax planning. These limits, of course, are changeable but general consensus is Congress will settle for the current $3.5M limit after 2010. Although life insurance does not incur income tax, being a POD (Payable On Death) financial product, and thus bypasses probate, I believe that it IS counted in your overall estate total and therefore, can trigger the federal estate tax when added to your other assets. To avoid this, there are two alternatives: - Have the policy owned by someone other than the insured; e.g., a spouse. - Set up an ILIT: Irrevocable Life Insurance Trust. You will need an attorney to do this, and sufficient cash flow to pay a considerable annual premium. This is usually a VUL (Variable Universal Life) policy, and is designed to move assets out of a taxable estate over time by purchasing an insurance policy which will eventually benefit the heirs by providing the cash necessary to pay any federal/state estate taxes (and providing liquidity with any remainder). Life Insurance can help with estate liquidity, but it is not in itself an immediate solution. Whoever you name as Executor of your will or Trustee of your Trust, will not actually be able to access cash funds unless they are a co-trustee of a jointly owned trust account. Anyone else will have to wait until they have a certified copy of the death certificate to present. If there are no problems and the county is efficient you might have this in a week or two. If there are any suspicious circumstances necessitating police or coroner investigations, the Executor or Trustee might have to wait a while. In either case, each has a fiduciary duty to keep the estate intact as much as possible before dispersing the assets. IOW, you can get life insurance proceeds fairly quickly - usually 2-3 weeks after they receive a copy of the death certificate. But your estate Executor or Trustee needs to start paying bills of the estate IMMEDIATELY upon death. This is something most folks never think about - there are legal and financial costs to death, and whoever's responsible for the estate had better have sufficient cash/credit up-front for at least one month, maybe two or three. They will get reimbursed from the estate, but it may take a little while. Just something to keep in mind!

I feel hesitant about asking my agent what he makes on the different policies because he's a close friend of in-laws. I told my DH years ago I don't like doing business with friends, but he feels we should give business to friends. Although, if my agent keeps pushing it, I may get bold enough to ask at some point:) I hear ya. I have one of those "universal life" policies because a friend of my (ex-)wife's was just getting into the business. :-p At this point, it's just as economically viable to keep it as it is to go term; the wasted money already is gone. I've come to the conclusion that business with friends is best performed at only the lowest-priced levels. And just as I would feel uncomfortable with the questions with which you're uncomfortable, I would feel greatly responsible if something bad happened to something expensive that I sold a friend. Better off to not even "go there".

Hi Jake, You are correct about these strategies requiring regular review & maintenance... however you've been taught wrong about Universal strategies. I want to address a mistake and misconception you have (and have no doubt been taught) about using a Universal Life contract instead of a Whole Life contract for a family banking strategy. I realize up front that in doing so I may get too technical for almost everyone else reading this... but here goes; In Universal Life design, you can choose either a level face (aka "option A," the absolute death benefit stays level, regardless of cash accumulation,) or an increasing face (aka "option B," the initially determined death benefit rides on TOP of any cash accumulation values.) When you pay a premium for life insurance, your premium is determined by how much of the INSURANCE COMPANY'S CASH is at risk to them of being paid out if you die. If you use a LEVEL face design (which is best for the family banking concept,) then the amount of the insurance company's funds "at risk" (the amount needed to be paid out at death) is reduced by the amount of additional cash accumulation. EXAMPLE: Assume you buy a $1 Million face (death benefit,) using a Level Benefit design. Assume this costs $300/year based on the insured's age, health, etc. for the first year. Assume the owner intends to transfer $250,000 of his retirement savings into this new account. (We'll ignore tax efficiency strategies for this lesson, as they are important, but irrelevant to the financial principles we're talking about here.) In his first year (as stated above,) his term premium is $300 which pays for the insurance company's risks (based on his age, health, etc.) of having to pay out $1,000,000 should he die the next day. $300 cost on $1MM is (divide the cost by the payout)... $0.0003 premium cost per dollar of benefit. In his SECOND year, however, two things have changed; A) he is one year older... so let's assume his premium increased to $0.00035, B) he has an accumulation of $250,000 in his account. Because his death benefit is LEVEL at $1MM, the insurance company's cash-at-risk is only $750,000 (since his accumulated cash value is inclusive in the death benefit payout.) THEREFORE, the annual cost is; $0.00035 premium x $750,000 benefit cash at risk to the insurance company ========== $262.50 / year That's a 12.5% DROP in premium costs in the very 1st year... EVEN THOUGH the insured has grown OLDER by a year! At an average 7.2% rate of return (*VERY* realistic for Indexed strategies) the account doubles every 10 years. Therefore, in 10 years the insured will be older, and thus the premium on their remaining term coverage will be higher... perhaps 10% or even 15% higher... but only on the amount of dollars at risk to the insurance company. In those same 10 years, the original $250,000 will have grown in a compounded fashion to $500,000... thereby dropping IN HALF the cash risks to the insurance company. Let's do the math; $0.000403 premium (.00035 at a 15% increase,) x $500,000 benefit cash at risk to the insurance company ========== $201.25 / year As you can see, a Level Benefit design for a Universal Life contract drops in actual coverage premium year after year, making the policy more and more efficient (better growth for the owner.) Further... assuming you are a "whole life" guy... if you compare actual mortality costs of whole versus universal, there is no comparison... whole is dramatically more expensive, dollar-for-dollar. WHOLE Life has its place... it is excellent for people who are actually using it for reasons of life insurance DEATH BENEFITS. In contrast, for people who don't need or care about death benefits per se, UNIVERSAL Life (particularly the market indexed account growth type) is far superior. It gives much better rates of return than Whole Life, at much lower costs. Cheers, Dave Donhoff Leverage Planner