• Question
  • Variable life insurance invested in mutual funds with a long term care rider--premium is 550 mo.

    Asked by a 69 year old man from Bakersfield, CA on 2/28/2013

    Variable life insurance invested in mutual funds with a long term care rider--premium is 550 mo. Costs are nearly the amount of the premium--Does this sound right?

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  • Categories: Retirement Assets and Savings, Life Insurance, Guaranteeing Income, Retirement Investing

Answers

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  • Yes and no. The costs of variable or universal life policies are high. They are among, if not the most, expensive investment or insurance product you can purchase.

    Agents are compensated by the death benefit. The higher the death benefit, the higher the premium. The higher the death benefit, the higher the costs.

    Any time I see a variable or U/L policy with a high face, it is completely expected to see a minimal or no cash value building in the policy, especially if the performance is poor.

    The challenge with your situation is that the LTC benefit is tied to the death benefit, so the agent is encouraged to sell a high face and a high commission policy.

    Yes, based on what you are saying, this sounds right.

    There are alternatives: asset based LTC policies, 2nd-to-die life policies with LTC riders, annuities with LTC riders and non-variable U/L life policies with LTC riders.

    It may be worth looking into alternatives. If your variable policy does not return the returns your agent illustrated the policy may lapse over time or you may have to put more than $550/mo in to keep it from lapsing.

  • Login to rate this answer:   Answered on 3/1/2013
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.