A shocking dirty little secret of Universal Life policies: you LOSE all your policy's cash value when you croak. This is true of Transamerica’s Financial Foundation Indexed Universal Life (FFIUL) policy and all other xUL policies.
Check out the two pages here. These are from a real FFIUL policy. An agent issued this last winter from a Northern California WFG office. Go to page 5 and read how the FFIUL defines “beneficiary.” That def makes clear your heirs receive ONLY the death benefit. You find no provision that lets you pass along even a single peso of your FFIUL's cash value to your family or friends or any other entities.
For example, let’s say you bought the FFIUL with a half-million death bennie. You pay into it over many decades and accumulate an equivalent half-mil in cash value. Your total policy value and death benefit equals a cool million dollars. *However*, when you go toes up, Transamerica KEEPS half of your million dollars. Transamerica gives the $500k death benefit to your heirs. But it TAKES your $500k of cash value.
Alas, this awful FFIUL problem is common among generic pre-packaged xULs. Neither this flagship policy from WFG, nor any other off-the-shelf UL, VUL, and IUL policies from, Pacific Life, Nationwide, Voya, or big carriers, let you pass on your policy’s cash value to your heirs. The NAIC (National Association of Insurance Commissioners) makes this fact crystal-clear. Please google this string: “insureuonline consumer life FAQs” to find the following:
“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 massively. For two reasons:
1) It’s YOUR cash. It’s what you realized AFTER you shelled out to Transamerica its COI (Cost of Insurance) charges and its many other charges and fees for covering you with life insurance. Why should Transamerica keep your cash? But that’s precisely what this company and virtually all other xUL issuers do.
2) The less cash value in your FFIUL to offset your death bennie, the higher COI charges you must pay. These charges start to blast into the stratosphere when you hit the “knee of insurance” in your 50s and 60s. The less cash value you have to mitigate soaring your COI charges, the sooner these charges WIPE OUT your cash value. This forces you to pay enormous premiums or let cancel your FFIUL. Then you 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 low your policy’s cash value, usually by converting into death benefit, then your late-life COI expenses will destroy your remaining cash value and blow your policy to smithereens. On the other hand, if you choose a level death benefit and choose to accumulate your cash value, then your heirs lose a ton of your money when you die.
Thanks “Ex-WFGer” over at Fin*nce Guy for most of this data and for the policy materials he or she posted on that site. If you’d like to read that commenter’s 2 September convo with Corona CA WFG agent Bryan Bravo, please search on this string: “Fin*nce Guy WFG” replacing the “*” with an “a.” Once there, search on “FFIUL a total non-starter” to reach the first message in that exchange. Then you can read that thread while scrolling up.
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