Comparing MoneyGuard to a New Single Premium IUL
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I recall doing a newsletter about a new single premium life policy designed to compete with MoneyGuard years ago, and while it was a well-read newsletter, it’s very interesting to see how products have changed over time.
What is MoneyGuard (MG)? MG is a single premium life policy designed to provide a LTC (long-term care) benefit through an accelerated death benefit.
The product was sold as a ROP (return of premium product) (the client could get all of their premium back at any point (without growth) if they no longer wanted the policy). The policy would provide a pretty decent LTC benefit without the ongoing premium of a traditional LTC policy.
A few things agents/clients don’t like about MG are:
1) There is real underwriting including LTC underwriting (a big decline rate).
2) It is a reimbursement policy (clients pay bills and then have to prove the bills are ones that are “qualified LTC services” under the MG contract).
3) The ROP isn’t what it used to be. It’s not 100% of the premium, it’s much less.
4) There is no rate of return on cash in the MG policy.
New single premium IUL policy for LTC-one prominent company just rolled out a new single premium IUL policy designed to provide a LTC benefit. The design is a little different than MG. What’s different?
1) It’s a simplified issue policy (client just answers a few questions vs. full blown underwriting)
2) It’s an indemnity policy (once you prove $1 worth of expenses for LTC, the company will pay the maximum benefit each year it’s allowable).
3) Guaranteed ROP (100% after 5 years).
4) The new policy is designed to grow cash over time. It also has an increasing death benefit.
6) The commission is higher than MG.
In short, the MG policy is more for those who want a higher LTC benefit that is more difficult to qualify for, and is a policy where the insured will never get their full premium back.
The new IUL has a lower LTC benefit but was built to provide growth on cash over time (better than CD rates of return) and provide a higher death benefit.
Comparing MG to New IUL product
The comparison is a little bit of an apples to oranges comparison.
The move your money to a single premium product instead of letting it sit in a CD is best given using the new IUL. The MG sale is more about the LTC for a client who doesn’t care about liquidity or a rate of return on their money (and MG is much tougher to qualify for). Let’s take a look at an example to compare:
Age 60 in decent health (meaning he can qualify for MG). Premium is $200,000.
Initial death benefit $308,000 (doesn’t increase over time)
ROP-$160,000 (which doesn’t increase over time)
Maximum LTC benefit-$926,000
Initial death benefit $380,000;
Death benefit at age 75-$380,000 guaranteed; $420,095 illustrated
ROP-$174,243 guaranteed year one; $184,231 illustrated
Surrender value-$200,000 guaranteed year five; $206,182 illustrated
Surrender value-$200,000 guaranteed year ten; $250,504 illustrated
Maximum LTC benefit-this changes over time. At age 70, the guaranteed LTC benefit would be $288,000; non-guaranteed would be $326,351.
Summary-MG is still the policy to use if the client’s main focus is a LTC benefit. The problem is getting through underwriting.
The new IUL is for clients who have money sitting around that they want secure, would like to generate a rate of return in excess of CDs, do want some amount of LTC benefit, and want more of a death benefit to pay should they pass (it’s a better wealth transfer tool).
Roccy DeFrancesco, JD
Strategic Marketing Partners