Anico Rolls out a New EIUL

ANICO Rolls out a NEW EIUL Policy
My Product Review is NOT Very Favorable

                If you want to attend the webinar on EIUL training/marketing we did last week that can now be accessed on recording, click on the following link: http://www.strategicmp.net/page/life/eiulwebinar.

                I also know that many after reading this newsletter will want to know about my favorite EIUL (Retirement Life™) policy. To learn more, please click on the following link: http://www.strategicmp.net/page/life/retirementlifesignup.  

                ANICO (American National Insurance Company) just rolled out a NEW EIUL (Equity Universal Life Insurance) policy. Not surprisingly, many IMOs have jumped on the band wagon; and I’ve been bombarded with ads to attend webinars so I can learn about this new product.

                I have to assume the IMOs that are offering webinars on the product think it’s a good product. I disagree if the goal of the product is to create the maximum tax-free borrowing from the policy in retirement. Reading this newsletter will save you a wasted hour on a webinar by some IMO pitching you the new ANICO product.

                Why we use EIUL—let’s face it‒the main reasons agents recommend EIUL policies is as follows:

                1) Tax-free growth (no capital gains or dividend taxes)
                2) No risk of loss (a guarantee of zero in most policies when the market goes negative)
                3) Gains are locked in (most policies lock in gains annually (gains pegged mostly to the S&P 500 index minus dividends)
                4) Tax-free borrowing (being able to remove money from the policy tax free in retirement or before if needed).

                Because the #1 reason clients buy EIUL policies is for the ability to borrow tax free from it in retirement, my review of the ANICO product will be very simple. I’m going to compare the ability to borrow from the new ANICO product to one of the products in the Retirement Life™ EIUL sales platform.

                My example is very simple. The example client is male, age 45, and in preferred health. I’ll assume a $15,000 annual premium from ages 45-65. I will assume max borrowing from ages 66-80.

                I ran three illustrations for ANICO and two using my favorite Retirement Life™ policy.

                1) ANICO default illustration (8.5% crediting rate with a 4.5% loan rate) vs. the Retirement Life™ illustration using an 8.5% crediting rate and its “contractually fixed” 5% loan rate.

                Which one wins?  From ANICO, the insured could borrow out $90,617 vs. $85,555 every year from my Retirement Life™ policy.

                Hey, but wait a minute, I said above that I thought the ANICO product wasn’t very good. If that’s the case, how did it beat my favorite Retirement Life™ policy?

                Simple‒the Retirement Life™ policy has a contractually fixed lending rate on its participating loan rate. The ANICO policy uses a fantasy loan rate on its variable/participating loan rate of 4.5%.  Using that rate (which is today’s historically low lending rate) and projecting it forward 40+ years is more like a nightmare not a fantasy.

                Why a nightmare? Because the 50-year historical average of the lending rates in life insurance policies is 7%. When a client figures out that they were sold an EIUL based on a bogus floating 4.5% lending rate, they should look to sue the agent for inappropriate sales practices.

                2) Let’s look at a more real world illustration (but still not what I would call “real world”).  I’ll compare ANICO using the default rate, and I’ll use the 50-year historical average lending rate when taking out loans (a 7% rate) and will compare that to the Retirement Life™ policy that has a contractually fixed lending rate of 5%.

                Which one wins?  From ANICO, the insured could borrow out $69,569 vs. $85,555 from the Retirement Life™ policy.

                3) Now let’s look at what I would consider a “real-world” or “apples-to-apples” comparison between ANICO and my favorite Retirement Life™ policy.

                I’ll reduce the default crediting rate of each policy by 15% (I think the default crediting rates are not real world and are too high).  Then I’ll use a 7% lending rate for ANICO and the contractually guaranteed lending rate from the Retirement Life™ policy

                Which one wins? From ANICO, the insured could borrow out $47,085 vs. $67,155 from the Retirement Life™ policy.

                Conclusion

                When you compare the ANICO policy using “real-world” assumptions, it’s not a very good policy in my opinion. 

                If you are selling EIUL policies, I recommend you skip selling the new ANICO policy and look at using policies in the Retirement Life™ platform.          

Roccy DeFrancesco, JD, CWPP™, CAPP™, CMP™
Founder, The Wealth Preservation Institute
144 Grand Blvd
Benton Harbor, MI 49022
269-216 
www.thewpi.org
www.cmpboard.org

Author of The Doctor’s Wealth Preservation Guide; The Home Equity Management Guidebook; The Home Equity Acceleration Plan; Retiring Without Risk; Bad Advisors: How to Identify Them; How to Avoid Them; and Peace of Mind Planning: Losing Money is No Longer an Option.