A shocking little-known fact of Universal Life (xUL) policies: you LOSE your policy's entire cash value when you die. This is true of Transamerica’s Financial Foundation Indexed Universal Life (FFIUL) policy and all other xUL policies.
I attached two pages from an actual FFIUL policy for you to read. It was issued earlier this year from a WFG office in Northern California. Please see page 5 and read FFIUL's definition of “beneficiary.” That definition makes it clear that your heirs receive ONLY the death benefit. It makes no provision for you to pass along even a single dollar of your FFIUL's cash value to your heirs.
For example, let’s say you bought the FFIUL with a $500,000 death benefit. You pay into it over many decades and accumulate $500,000 in cash value. Total policy value and death benefit equals 1 million dollars. However, when you die, Transamerica KEEPS half of your million dollars. Transamerica gives the $500,000 death benefit to your heirs. But it TAKES your $500,000 of cash value.
I wish this grave problem was unique, but it’s not. Neither the FFIUL, nor any other off-the-shelf Universal Life Policies from Transamerica, Nationwide, Pacific Life and other major carriers, let you pass on your policy’s cash value to your heirs. The National Association of Insurance Commissioners (NAIC) makes this fact very clear in its FAQs:
Www dot insureuonline dot org/consumer_life_faqs.htm
“Q: What happens to the cash value in my policy when I die?
A: … No matter how much cash value you may have had in the policy the moment before you died, *your beneficiaries can collect no more than the stated death benefit*…
Your policy’s cash value matters hugely. For two reasons:
1) It’s YOUR money. It’s the money you realized AFTER you paid Transamerica its Cost of Insurance (COI) charges and its many other fees and charges in exchange for the insurance coverage it gave you. Why should Transamerica keep your money? Yet that’s exactly what TA and most other xUL carriers do.
2) The less cash value you have in your FFIUL to offset your death benefit, the more COI expenses you have to pay. These COI charges start to soar higher when you hit the “knee of insurance” in your 50s and 60s. The less cash value you have to offset your death benefit COI charges, the sooner your skyrocketing COI charges will wreck your cash value. This forces you to pay enormous premiums or let lapse your FFIUL and lose everything--your cash value AND your death benefit.
Bottom line: The FFIUL and other standard xUL policies are LOSE-LOSE for you. If you keep your policy’s cash value low, e.g. by converting large amounts of cash value into death benefit, then late-life COI charges will gobble up your remaining cash value and destroy your policy. If you choose a level death benefit and choose to accumulate your cash value, then your heirs lose more money when you die.
Thank you to “Ex-WFGer” at Finance Guy for much of this information and for the FFIUL materials he/she posted on that site. If you’d like to read Ex-WFGer’s exchange yesterday with Corona CA WFG agent Bryan Bravo, please go here:
www dot finance-guy dot net/streetonomic/world-financial-group-review
Once there, search on “staggering drawback.” From there you can read Ex-WFGer’s comments while scrolling upwards.
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