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At Fleming Financial Services, Inc., our role is to assist our clients in defining and realizing their financial objectives and goals. We work with our clients to implement personalized plans designed for their unique situations. Our areas of concentration are: Retirement planning, Estate and Wealth Transfer strategies, and Business Continuation planning. We emphasize the importance of conducting our business with integrity and professionalism. As a member of PartnersFinancial, an independent national financial services company, we are able to provide access to sophisticated resources for the benefit of our clients. Some of the professionals with our firm are currently registered to conduct business through NFP Securities, Inc. With those additional resources in place, we help facilitate the complex corporate and personal financial decisions our clients must make.
INDEXED UNIVERSAL LIFE: Mechanics and Capabilities - Part 1
Celeste Moya, AVP, Product Management, NFP Life BeachThe life insurance market showcases an ever-changing spectrum of products. It is common to see products come and go as market conditions change and consumer needs shift. However, every so often the market aligns perfectly to boost the market share of a specific product type.  Over the past few years, we have seen rapid growth in one product type in particular: indexed universal life (IUL). According to LIMRA’s “U.S. Individual Life Insurance Sales Fourth Quarter 2011” report: “Altogether, companies grew their IUL annualized premium by 38 percent in 2011. IUL now represents about 25 percent of UL and 10 percent of total annualized premium sales. Again, we expect IUL sales to remain strong as these products have proven to be a good fit in an uncertain economy and companies continue to introduce products and/or enter the market.” … “The biggest stimulant behind independent agent sales (in terms of absolute dollars) was IUL, which represented 20 percent of the premium sold through free agents in 2011.”1 Also in regard to IUL, AnnuitySpecs’ “Indexed Sales & Market 4th Quarter 2011” report said: “Sales for the fourth quarter of 2011 were $321 million, compared with sales of $221 million for the fourth quarter of 2010. Fourth quarter indexed life sales were up nearly 28% when compared with the previous quarter, and up more than 45% as compared to the same period last year. This was another record-setting quarter for indexed life sales. This was also the fourth consecutive record setting year for sales, beating last year’s record by nearly 40%.”2 This data clearly communicates that IUL is taking the life insurance market by storm. There is no better time to become familiar with the mechanics and capabilities of IUL. What Is IUL? When you get past all the complex terminology, IUL products are very similar to fixed universal life (UL) products, but with a different way of crediting interest.  Like fixed UL, IUL offers the client the ability to customize the death benefit, length of coverage and premium obligation, and has the potential to accumulate cash value on a tax-deferred basis.  With a fixed UL product, however, the cash accumulation, is based on a fixed interest rate that is credited to the policy as declared in advance by the issuing insurance company. IUL offers a fixed account option, but, in addition, it offers an index account. Performance of money allocated to the index account(s) is tied to the movement of an external market index, such as the S&P 500, or, in some cases, multiple indices. Over time, and particularly during periods of low fixed-interest rates, because of its participation in the index market, an IUL has the potential for greater interest crediting than a fixed UL. It is important to note that IUL products simply participate in the movement of the selected index (or indexes), and do not involve the actual purchase of stocks; IUL provides indexed-linked returns. A unique feature of IUL and a key differentiator between IUL and all other UL products is that IUL offers protection from negative returns caused by a poorly performing market or sudden market downturn. This protection is provided in the form of a minimum guaranteed interest rate commonly referred to as the “floor.” Floor rates currently range from 0–2 percent annually. Fixed UL offers generally stable and conservative crediting rates and, therefore, conservative returns. Variable universal life (VUL) premiums are invested in subaccounts that are directly linked to the stock or bond market, offering unlimited growth, but making them particularly susceptible to the ups and downs of the stock or Market risk   bond market. The downside protection that IUL offers helps bridge the gap between low-rate fixed UL insurance and riskier VUL insurance. Copyright © 2013 NFP. All rights reserved.    
Thomas Joseph
Other articles by: Thomas Joseph
Categories: Fleming Financial Services, Fleming Financial, General Information, Life Insurance
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