Two weeks ago we talked about the potential impacts of the current economic environment on our business. One of the points was that Guaranteed UL (GUL) price increases were a probable outcome, as well as the potential for current rate reductions on current interest rate focused UL (CUL) contracts. Why bring it up again? Simple - being aware of something is great, but having a game plan for dealing with it is better!

So what's the plan? A little education, and perhaps a different approach to designing cases. For the education, John Hancock has just introduced a new presentation that walks through the potential savings of selecting a CUL contract versus a GUL. They take it one step further and discuss the impact of future rate reductions on policy performance. Take a look at it here. The second part of the education piece is a design approach that I think is very well suited to today's environment, and it builds on the material from Hancock above.

Consider the following:

Rather than purchase a GUL, purchase a CUL contract funded at the same premium.

Using John Hancock as an example, the guarantees are through age 90, longer than Life Expectancy.

Cash growth is positive in every year based on current rates.

Even if Hancock drops the current rate to the guaranteed minimum in year two of the contract, the projected performance is through age 94.

In this example (Male age 65, PNS, $1mil, just like in the Hancock piece from the link above) Hancock can drop the rate to 3.2% and the policy still carriers to age 120 on the current side.

OK, the outlay is identical, we have acceptable guarantees, solid projected death benefit duration and a bunch of cash. So what? A couple points:

• Exit Strategies - You really don't have one other than death or lapse without value in a GUL. Not a great outcome if the insured decides they can't or don't want to continue premium payments.
• Potential premium savings - How about an annual review with an in force ledger that shows the client can REDUCE their premium outlay. If the carrier maintains a reasonable interest rate, this is a very likely outcome. A policy outperforming expectations? Nice to be on that side of the equation.
• Greater premium flexibility! Need to skip a premium? No problem! Of course, an in force ledger to demonstrate impact on policy performance is a good idea BEFORE electing to skip a premium.

So how do we execute on this? Easy. Start showing this design every time you show a GUL contract. We'll run it for you! Oh, there is one last benefit - if there is a future product pricing development that produces a more efficient contract, the cash in this design could make a 1035 exchange a possibility. With a GUL? No way. Good for the client of course, and good for you, as it generates another commission!