Here's the issue with any type of variable universal life policy - the agent's premium and company fees can be set up different ways. Surprise, surprise - the default on running a customer quote is set to the agent/company advantage, NOT the consumer. You can get them to change this - BUT you have to ASK. The agent should be willing to do this, but very few of them will volunteer (not surprisingly). This is a hybrid policy currently very "hot" in insurance circles because so many people think they might be "wasting" their premium dollars. Needless to say, you will pay more for such a hybrid policy, than you would if you just bought level term life insurance and a standard LTC policy. Unless you seriously need life insurance for estate reasons - I have it, but for a very specific reason - I can't see why anyone would buy these types of policies. You pay for auto insurance and homeowners insurance for years, with most people never making any serious claims. Is that money wasted? No - it is intended to mitigate risk in an emergency. LTC insurance is no different. If your life expectancy factors are good, you want to age "in place", and you can't afford to self-insure, then buying an LTC policy can help mitigate the risk of running out of money and being forced into only Medicaid facilities, rather than having a variety of choices open to you. LTC insurance is not for everyone, and there are many policy details needing prudent and careful review. It may indeed be true that a hybrid policy would work well for you...but I would carefully compare it with the standard policy and a level term life quote before making any decision. Good luck to you and others going forward. This is not an easy or simple decision to make. You will need the help of an ethical insurance salesman, and that's something you will need to find on your own. They do exist, so start searching and asking lots of questions.

Hi Christine, I know Dave is a well respected advisor on these boards, but I have to say I have always been told to steer clear of anything other than Term Life. Thanks... uhh, I think? Hopefully I'm not losing any respect from the lack of financial planning experience from whoever 'always' told you to steer clear of anything other than Term Life. Many people here have also "always" been told to pay off their mortgage as fast as possible, "period," regardless of the risks & harm it can create too. What many have "always" heard is not always so valid. Dave perhaps you could clarify why Universal Life is a good option in general and also specifically in this case? I have been on this site off and on for a very long time, however, I have not read that many posts on this particilar board to know your general philosophy on this. Sure. FIRST off, it is most likely the case that "everyone" who "always" advised you to avoid anything but "term" was specifically talking about buying life insurance for the purpose of the insurance DEATH benefits... not the financial planning features available within certain types of it. For the best death benefits "bang for the buck"... Term life premiums are state regulated, so for the most part you pay for the benefit coverage you get, and nothing more, regardless of the carrier (which is GOOD if what you want is a payoff at death.) Differences in term life premiums are generally quite small, and when one carrier appears to be "cheaper" per $1,000 of benefit than another (i.e. if you Google for 'cheapest term insurance' etc.) its generally because that carrier has less capital reserves to protect its policy-holders, thus less costs... and is thus more at risk of being illiquid... *OR* it fights harder NOT to pay all of the benefits expected when its policies mature, and thereby it has less costs of fulfillment. There are OTHER very important financial benefits to life insurance contracts, however, OTHER than the ultimate payoff of a death benefit at policy maturity. Congress has written legal "tax-shelter" features into the IRS code such that cash values sheltered within properly structured life insurance contracts grow and are harvestable UN-TAXED. Universal Life *IS* a term life policy (underwritten through age 100,) that offers a SEPERATE (un-comingled) cash accumulation account with the unique tax sheltered benefits only available inside cash-value life contracts. (NOTE that this is distictively different from old-fashioned "whole life" contracts that inseperably comingle insurance costs with their cash-values.) For FINANCIAL PLANNING purposes we want the maximum shelter benefits with the LEAST actual insurance coverage we can get away with (since, for this particular purpose, we don't care about death benefits.) The cash account within a Universal policy is allowed to grow tax free (no annual capital gains nor income taxes,) and is allowed to be accessed for spending tax free (via zero-interest policy "loans" which have no repayment requirement until the policy "matures"... aka when the insured dies.) Our OP is concerned about college tuition fund planning. The general strategy with college funding is to take advantage of *ALL* external funding resources (public assistance, grants, loans, and public/private scholarships) *BEFORE* dipping into the family-accumulated funds. THe catch-22 is that *MANY* external funding sources are "means tested." This means that they look at the student's fmaily's financial profile 1st... and if the family has funds in reserves, the external sources DEDUCT those from the support calculations (in essence saying "you guys drain your OWN accounts before we'll offer you any support!") Of course, this is completely contrary to the idea of rewarding those who are responsible... which is the whole point of using Universal Life insurance contracts to accumulate college tuition (and subsequently retirement funding for the parents.) Universal Life policies can also be "owned" by someone other than the person that the policy is insuring (the "insured.") The owner can be grandparents, uncles/aunts, god-parents, seperate trusts, or simply trusted friends. Because the ownership of this accumulation asset can be legally seperated from the student's family balance sheet, the student's family does NOT have to drain all of their own reserves before taking advantage of external educational support resources. PERSONALLY (and professionally,) in regards to actual death benefits... I would probably almost "always" harmonize with whoever else was "always" telling you to avoid anything other than term life. For death benefits (replacement of a parent's income for family support, most commonly,) term is generally the best way to go. For FINANCIAL PLANNING, however... age-100 term life coupled with cash values (in the form of Universal Life,) can be a very sharp strategy from both the tax-shelter perspective, and the avoidance of means-testing punishment of the more financially responsbile. Cheers, Dave Donhoff Leverage Planner

Hi Jake, You are correct about these strategies requiring regular review & maintenance... however you've been taught wrong about Universal strategies. I want to address a mistake and misconception you have (and have no doubt been taught) about using a Universal Life contract instead of a Whole Life contract for a family banking strategy. I realize up front that in doing so I may get too technical for almost everyone else reading this... but here goes; In Universal Life design, you can choose either a level face (aka "option A," the absolute death benefit stays level, regardless of cash accumulation,) or an increasing face (aka "option B," the initially determined death benefit rides on TOP of any cash accumulation values.) When you pay a premium for life insurance, your premium is determined by how much of the INSURANCE COMPANY'S CASH is at risk to them of being paid out if you die. If you use a LEVEL face design (which is best for the family banking concept,) then the amount of the insurance company's funds "at risk" (the amount needed to be paid out at death) is reduced by the amount of additional cash accumulation. EXAMPLE: Assume you buy a $1 Million face (death benefit,) using a Level Benefit design. Assume this costs $300/year based on the insured's age, health, etc. for the first year. Assume the owner intends to transfer $250,000 of his retirement savings into this new account. (We'll ignore tax efficiency strategies for this lesson, as they are important, but irrelevant to the financial principles we're talking about here.) In his first year (as stated above,) his term premium is $300 which pays for the insurance company's risks (based on his age, health, etc.) of having to pay out $1,000,000 should he die the next day. $300 cost on $1MM is (divide the cost by the payout)... $0.0003 premium cost per dollar of benefit. In his SECOND year, however, two things have changed; A) he is one year older... so let's assume his premium increased to $0.00035, B) he has an accumulation of $250,000 in his account. Because his death benefit is LEVEL at $1MM, the insurance company's cash-at-risk is only $750,000 (since his accumulated cash value is inclusive in the death benefit payout.) THEREFORE, the annual cost is; $0.00035 premium x $750,000 benefit cash at risk to the insurance company ========== $262.50 / year That's a 12.5% DROP in premium costs in the very 1st year... EVEN THOUGH the insured has grown OLDER by a year! At an average 7.2% rate of return (*VERY* realistic for Indexed strategies) the account doubles every 10 years. Therefore, in 10 years the insured will be older, and thus the premium on their remaining term coverage will be higher... perhaps 10% or even 15% higher... but only on the amount of dollars at risk to the insurance company. In those same 10 years, the original $250,000 will have grown in a compounded fashion to $500,000... thereby dropping IN HALF the cash risks to the insurance company. Let's do the math; $0.000403 premium (.00035 at a 15% increase,) x $500,000 benefit cash at risk to the insurance company ========== $201.25 / year As you can see, a Level Benefit design for a Universal Life contract drops in actual coverage premium year after year, making the policy more and more efficient (better growth for the owner.) Further... assuming you are a "whole life" guy... if you compare actual mortality costs of whole versus universal, there is no comparison... whole is dramatically more expensive, dollar-for-dollar. WHOLE Life has its place... it is excellent for people who are actually using it for reasons of life insurance DEATH BENEFITS. In contrast, for people who don't need or care about death benefits per se, UNIVERSAL Life (particularly the market indexed account growth type) is far superior. It gives much better rates of return than Whole Life, at much lower costs. Cheers, Dave Donhoff Leverage Planner

Depending upon your life situation (if you need insurance at all, some don't), a person should have anywhere from 4 to 7x their annual gross income in total life insurance. Life insurance, BTW, passes tax free to the beneficiary although it is counted in the total value of your estate for federal estate tax purposes. Wealthy people get around this by setting up ILITs (Irrevocable Life Insurance Trusts). As an Exec Asst for salespeople, I worked at CIGNA insurance for 13 years. I also worked at an independent CFP's office for 18 months, who was both a broker and insurance agent. I would recommend level term insurance - in fact, the CFP I worked for refused to recommend anything else unless the policy was for tax planning purposes, in which case he recommended Universal Life. Annual renewable insurance costs much more over the long run. Mortality statistics have improved so much that term insurance is quite simply, the most economical choice for just about everyone. And level term insurance means your premium will never change, regardless of your health situation, for the entire period it is in force. Insurance companies make a lot of money off whole life and even universal life policies. With the decline in the stock market, the advantages of universal life have suffered compared to straight term insurance. Never underestimate what long-term inflation does to cash values. It hasn't been that long since people thought $50K or $100K was a lot of life insurance - but these days, $100K buys very little if your family is trying to live off of it for the next 15 years, or trying to send two kids to college and grad school. Pick the longest term that takes you to retirement age. Most people GENERALLY do not need large amounts of insurance after they retire, but YMMV. Disability insurance, if you are not covered at work, is extremely useful up until the time you retire. But the underwriting standards are extremely strict right now, unlike life insurance underwriting. It is virtually impossible to get a policy for more than 60% of your last two years' income (verified by copies of your tax returns) even if you are in good health. In contrast, I am a standard risk, NOT preferred. I have $750K of life insurance for less than $80/mo that was purchased a few years ago when I was over 50. One is a 15-yr level term, and the other is a 20-yr level term. I have them for estate planning purposes. If I were to try to purchase whole life or universal life in that amount, the cost would be astronomical.