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Nov 25, 2008 9:04 am

Hey guys,

 
Here's a case for you:
 
Client:  Married 59 yo female with history of skin cancer (uninsurable)
 
Investment:  Variable annuity with cost basis of $130K, death bene of $147K and market value of $130K.  VA is out of surrender.
 
Client does not care for this annuity because there are no living benefits and sub-account performance has sucked.
 
Looked at whole-life and term - no go.
 
This client is more concerned with a large death benefit, but feels trapped by this annuity.  ie.  she has to wait for the market to advance to get her DB higher.
 
Any ideas?
Nov 25, 2008 9:34 am

She's not uninsurable, though the she will be graded. If this money is to be left behind, why would she be unhappy about the current contract not having living benefits? If the money is DEFINITELY earmarked for the kids and she doesn't want the LI, put her in the Allianz Master Dex 10. If it were me, I'd shop around for a single premium whole life policy and give her some options. 

Nov 25, 2008 9:46 am

Another important thing to investigate before you surrender the existing annuity: find out the details on how partial withdrawals affect the death benefit, and what the minimum balance is that is required to maintain the annuity and, in so doing, the 'excess' DB.  In certain situations you can do a partial 1035 out into a new product with better living benefits while leaving a minimal amount there (maybe $1K?) in order to maintain the effective $17K DB (difference between the current DB and the market value).

I know $17K DB isn't a lot, but every little bit helps especially when the client is uninsurable or rated such that the cost of insurance becomes much higher.  The client will appreciate the unexpected benefit, and you can still use most of the money to 1035 elsewhere, which you will like.

The requirements on this vary from carrier to carrier, so you need to make some calls to find out what this carrier allows.

Nov 25, 2008 10:24 am
Hank Moody:

She's not uninsurable, though the she will be graded. If this money is to be left behind, why would she be unhappy about the current contract not having living benefits? If the money is DEFINITELY earmarked for the kids and she doesn't want the LI, put her in the Allianz Master Dex 10. If it were me, I'd shop around for a single premium whole life policy and give her some options. 

 
Had it shopped to several big carriers for term and WL and she is not insurable period.  Cancer advanced to lymph nodes.  No carrier will touch her.
 
The money is not going to the kids, but to her husband (he loses her pension when she dies).  Living benefits aren't the whole equation but they don't feel they're getting anything out of this annuity.  I'll check out Allianz.  thanks.
Nov 25, 2008 10:25 am
Morphius:

  In certain situations you can do a partial 1035 out into a new product with better living benefits while leaving a minimal amount there (maybe $1K?) in order to maintain the effective $17K DB (difference between the current DB and the market value).

 
Already did that.  The contract is dollar for dollar, not pro-rata.
Nov 25, 2008 11:19 am

I don't get it, does she want the death benefit for the husband or income to replace her pension for the husband?

 
Trying to mix the two can be like mixing oil with water.
Nov 25, 2008 11:35 am

She's down 11 percent from her DB, which I assume is either the high value mark or what she put in. That's pretty good in this market. ... Guessing here, but if it's out of surrender and she's held it for a while, being down after 10 years is a drag, but that's the reality right now.

...
I've never run into anybody who a) likes their annuity, or b) can remember who sold it to them, or c) exactly why they bought it.
 
Nov 25, 2008 11:44 am
snaggletooth:

I don't get it, does she want the death benefit for the husband or income to replace her pension for the husband?

 
 
Husband would prefer a larger DB.  But they're ticked because the contract doesn't even have any living benefits that can be attached.  If they annuitized it, or we 1035 for a living benefit, it wouln't even come close to replacing the pension, so DB is primary concern.
Nov 25, 2008 11:46 am
buyandhold:

She's down 11 percent from her DB, which I assume is either the high value mark or what she put in.

 
 
Here's the history of the annuity.
 
Bought 6 years ago.  Out of surrender.  Put in $130.  Grew to $147.  Market started to tank and I had them move to cash back in April.  Now sitting at $130 in a fixed bucket.
Nov 25, 2008 11:54 am
Hank Moody:

She's not uninsurable, though the she will be graded. If this money is to be left behind, why would she be unhappy about the current contract not having living benefits? If the money is DEFINITELY earmarked for the kids and she doesn't want the LI, put her in the Allianz Master Dex 10. If it were me, I'd shop around for a single premium whole life policy and give her some options. 


 
Before you take advice, read this report: http://www.guardingyourwealth.com/SpecialReports/Allianz.htm
 
I don't even know who you work for, but I doubt your broker/dealer will let you sell this crap.
Nov 25, 2008 12:08 pm
etj4588:
snaggletooth:

I don't get it, does she want the death benefit for the husband or income to replace her pension for the husband?

 
 
Husband would prefer a larger DB.  But they're ticked because the contract doesn't even have any living benefits that can be attached.  If they annuitized it, or we 1035 for a living benefit, it wouln't even come close to replacing the pension, so DB is primary concern.
 
A few companies allow you to add/cancel any bene's anytime.  If you haven't checked with the company, you might do that. 
Nov 25, 2008 12:32 pm
snaggletooth:
etj4588:
snaggletooth:

I don't get it, does she want the death benefit for the husband or income to replace her pension for the husband?

 
 
Husband would prefer a larger DB.  But they're ticked because the contract doesn't even have any living benefits that can be attached.  If they annuitized it, or we 1035 for a living benefit, it wouln't even come close to replacing the pension, so DB is primary concern.
 
A few companies allow you to add/cancel any bene's anytime.  If you haven't checked with the company, you might do that. 
 
They cannot be added - already checked.
Nov 25, 2008 12:33 pm

Hartford has some riders that may let you protect the income and increase the death bene, whichever is more important to the clients. 

 
They have a couple of versions of an income rider that guarantee a rising income stream.  Basic concept is that your 59 year old client puts money in and holds it for 5 years and from that point on every time she hits an age band they guarantee a .5% raise.  So, worst case scenario at 64 she takes a check for approx $6500/yr, then it steps up to $7150/yr at 65, then increases every 5 years after that.  That's worst case scenario. 
 
On the DB side, you can add MAV Plus which gives her an additional 40% bump on the gains she makes in the annuity, up to I think 200% of the premium payments.  I've not used it, so my understanding of it isn't the best.   
 
It's kind of overkill to use both, but you can if you want.  I'd probably find out which is more important overall and go with that rider. 
 
You can also find out from the insurance carriers how long she'd need to be in remission before you should apply for coverage.  I understand the lymph node issue may kick her out forever, but some insurance companies have a statute of limitations, so to speak, on cancer.  So, she may be uninsurable right now, but 5-7 years down the road if she's still in remission and her doctors have given her a clean bill of health she may be eligible.  Just a thought.   
Nov 25, 2008 12:43 pm
Borker Boy:
Hank Moody:

She's not uninsurable, though the she will be graded. If this money is to be left behind, why would she be unhappy about the current contract not having living benefits? If the money is DEFINITELY earmarked for the kids and she doesn't want the LI, put her in the Allianz Master Dex 10. If it were me, I'd shop around for a single premium whole life policy and give her some options. 

 
Before you take ol' Hank's advice, read this report: http://www.guardingyourwealth.com/SpecialReports/Allianz.htm
 
I don't even know who you work for, but I doubt your broker/dealer will let you sell this crap.



I know the author. He's a very nice guy. He used to be a registered rep and it didn't work out too well for him. We've spoken on the phone several times and I gave him some tips on how to do business.

He is now a CFP and he has a financial interest in hating indexed annuities. CFP's are like democrats. They don't have useful ideas to offer, so, instead, they blast the competition to try to get clients.

I have never sold a Master Dex 10. The only time it would be right, in my mind, is when all of the money will be left behind. Before I would do that I would exhaust all other options, first. In my opinion, it is a last resort product, not a go-to product.

Nov 25, 2008 8:01 pm

sorry Hank,  Borker is right, that Allianz crap is great for the broker selling it and not for the client. 

Nov 25, 2008 8:34 pm

Hey, where's Rick Ross when we need him? He'll know what to do with an annuity.

Why not do a 1035 exchange to an A-share Lincoln American Legacy variable annuity? Low cost, low expenses, solid historical sub-account performance.

With Lincoln you can slap on guarantee riders later on after the policy has a chance to grow some in value (assuming the market starts climbing upward in the next few years. You can start with minimal riders initially to keep the expenses low.

If you want guaranteed step-ups you could look at Hancock's Variable Annuities. They're one of the last (only?) AAA-rated insurance companies I believe.

CR.

Nov 25, 2008 8:45 pm

colorado, take a look at lincoln's choice plus... another good one, and the JH Venture variable annuities are good products too...

 
Nov 25, 2008 11:10 pm

"If you want guaranteed step-ups you could look at Hancock's Variable Annuities. They're one of the last (only?) AAA-rated insurance companies I believe."

 

Who told you this...a Hancock wholesaler?
 
This person with the cancer is insurable. 
 
Nov 26, 2008 12:08 am
anonymous:

"If you want guaranteed step-ups you could look at Hancock's Variable Annuities. They're one of the last (only?) AAA-rated insurance companies I believe."

 
Who told you this...a Hancock wholesaler?
 



Why yes, as a matter of fact! How'd you guess?   Plus I checked on JH via S&P's website:

John Hancock Life Insurance Co.




Edit: I just found this site that lists AAA-rated insurers: http://www.insure.com/articles/interactivetools/sandp/new_s&p.jsp

I wonder if Cornhusker Casualty Co. has any VA's in their lineup?

Nov 26, 2008 6:12 am

ColoradoRep, why would we care about their rating from over 2 years ago?  Look at the date. 


I wasn't questioning Hancock's rates, just the claim that they are the last of the AAA insurers.  They still are AAA from S&P.


1)Old information is useless.
2)Don't blindly trust wholesalers.
3)You have a responsibility to work with correct information.


With Lincoln you can slap on guarantee riders later on after the policy has a chance to grow some in value (assuming the market starts climbing upward in the next few years. You can start with minimal riders initially to keep the expenses low.

If the client follows this advice, aren't they screwed if the market goes down the next few years?


You mentioned both this and Hancock.  Does your information for these products come from wholesalers/marketing material or does it come from the actual prospectus and the contractually guaranteed annuitization rates?  If it doesn't come from the latter, do not pass go.  Do not collect $200.