In my zeal to trounce on life insurance companies that are doing wrong by their clients I mistakenly posted that Banner Life and American General do not offer a guaranteed permanent product for conversion for customers that have had a policy in force for more than 5 years.
Banner’s stated “practice” on conversion is that during the first 5 years of the policy a customer can convert to any of their permanent products. After the 5th policy year conversion is limited. That doesn’t exist anywhere in the policy. I was mistaken when I said that the only option was a universal life with a 10 year guarantee. After emailing my concerns to Chris Hooper, FALU, FLMI, ARA, ACS, a regional representative with Banner, he clarified that there curently is a fully guaranteed UL product available after the 5th year. The only caveat is that it is about 25% more expensive than their other fully guaranteed universal life.
So, that brings us to a couple of realities that I think are very important. The conversion language in the policy doesn’t even mention the 5 year rule currently in effect and doesn’t promise that there will always be a fully guaranteed permanent product available. Those two issues are current company practice and not guaranteed by contract. Chris did assure me that, ” (While) It is company practice. Best I can add is that we are focused on guaranteed protection products”. My experience with Banner is that he isn’t pulling our leg on that one. So, if Banner is offering a fully guaranteed product, albeit at a higher price, I would say that is meeting their commitment to their policy holders. I reserve the right to Chris’s head off if that changes though.
Now to the 25% higher premium on that fully guaranteed product. Where have we heard that before? Kevin Cox with Lincoln Financial suggested that those wanting to take advantage of the historically low prices on no lapse guarantee products should get off the fence and lock it in. His promise was that within 3-6 months prices would go up 125 to 25% industry wide.
I also mentioned that I may have been a little unfair with American General. I don’t feel quite so apologetic with them since the other option they have instead of the 10 year guarantee UL after the 5th year is a whole life policy that is four times more premium than their no lapse UL would be. Hardly a realistic option.
While we’re on the subject though I should mention that Phoenix Life offers the worst conversion option I’ve seen with a 5 year guarantee UL. Just this week I learned that the venerable New York Life, the cash cows of all cash cows, is now making their customers pay for an additional rider that will extend their conversion option beyond the first 10 years. And the last bit of news, while not surprising given John Hancock’s earlier abandonment of their whole life policy was offered by Chris Hooper, “By the way, did you notice that John Hancock is positioning their Protection product, that only guarantees to “assumed mortality”, against permanent UL products? If the age is indeed assumed mortality, that means that 50% of the clients will live past the guaranteed period.” When he says they are positioning, what he means is that their product will be priced comparably to products that guarantee a death benefit and level premium for life.
Bottom line. WARNING. WARNING. THIS IS NOT A DRILL!! Prices are going up on permanent products and it isn’t a matter of when or if. It is happening right now. Prices up. Guarantees shortened.