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From: pmn@pyuxv.UUCP (P. M. Nauman)
Newsgroups: net.invest,net.consumers
Subject: Re: Pros/Cons Universal Life Insurance
Message-ID: <602@pyuxv.UUCP>
Date: Tue, 18-Sep-84 09:57:02 EDT
Article-I.D.: pyuxv.602
Posted: Tue Sep 18 09:57:02 1984
Date-Received: Tue, 25-Sep-84 03:25:44 EDT
References: <731@u1100a.UUCP>
Organization: Bell Communications Research
Lines: 53

About a year ago I cashed in the ancient life insurance policy that
my parents got for me at birth and had faithfully paid for 23 years.
I rolled the proceeds over into a Universal life policy that was
sold to me by a smooth talking insurance salesman who was promising

	a) ~12% tax-deferred yield on the cash value of the policy

	b) fixed low cost insurance

He went ahead and got me a policy for $200,000, when all I wanted
was one for $50,000. He assured me that once the policy was approved
we could lower the face value. When I finally got the policy from
him (it took him almost 2 months) I found that the face value could
only be changed after 2 years. So, I'm stuck paying for insurance
that I don't really need for another year.

Last month I received my policy statement and got a bit of a shock
on several points:

	- the 12% (actually averaged around 11.5%) was only paid on
	  funds in excess of $800 - the first $800 earns only 4% !!
	  This meant that my $1200 only earned around 6.5%.

	- my initial premium ($1200) and all future premiums are
	  subject to a 2.5% load to pay for a guaranteed premium
	  payment rider that I did not ask for.

	- the cost of insurance was indeed reasonable (about $1.30
	  per $1000 as opposed to ~$14 for the policy my parents
	  gave me) but that was offset by the fact that I was paying
	  for 4 times more insurance than I needed.

I checked the policy forfeiture terms and loan provisions. Sure
enough, there was no way to get any money out. The surrender charge
in the second policy year is 96% (!!) of the cash value.
Furthermore, one may only take out loans against the surrender
value, in this case 4% of cash value.

What this all boils down to is that my money is stuck in the policy.
In about a year I can lower the face value of the policy but by then
the cost of insurance will have eaten up about half of my original
$1200. I can then let the cash value slip to zero and either
continue to pay it as term insurance or let the policy lapse, neither
of which is all that bad.

So if I were to offer any advice at all about Universal Life it
would be that it is great for insurance but it's not a very good
investment. Also, (this probably goes without saying) make sure you
know what you are buying - READ the policy.


		Paul Nauman	pyuxv!pmn
		Bell Communications Research