The extra silos depicted in blue represent additional indexed crediting potential from the Performance Factor. Variable life is a kind of permanent life insurance. Indexed Universal Life Insurance does not directly participate in any stock or equity investments. People intuitively understand that there is no free lunch or easy money available when it comes to growing your wealth for retirement. No one knows exactly how or when, but I think we can all agree that will markets go up and go down…sometimes violently. Although the Overloan Protection Rider may protect your policy from lapsing, a bad sequence of returns in retirement could reduce the amount of total income generated by the Pacific Discovery Xelerator. Take a gander at these actual raw indexed returns that can no longer be run through Pacific Life’s illustration software. Hopefully, this piece helped to clarify a lot of the mystery shrouding the new Pacific Discovery Xelerator product and its mysterious Performance Factor. 2 … Click here or on the image below to have one of our independent agents help you compare and stress-test PDX’s projected performance using your specific numbers. Not For Use With The Public. It’s a guarantee that contractually activates if your policy was about to lapse or if you choose to surrender it voluntarily at any time for any reason. Crediting Methods. However, Pacific Life has never raised their charges above what was illustrated, nor have any of the top IUL carriers which are mainly mutual companies. Notice what often happens after bad spells in the S&P 500 index. This equates to a 0.25% net cost to borrow. Most people usually have enough raw market exposure in their 401(k) or brokerage accounts anyway. Pro-Tip: Pacific Life’s software cannot illustrate monthly income withdrawals from their IUL policies until the 15 policy year. 4. Even if you level out the death benefit as quickly as year 2, the higher schedule of charges remains in place. Click here to understand how Whole Life promises guaranteed growth. This policy includes similar features to a regular universal life policy, including the short-term no-lapse guarantee. Pacific Discovery Xelerator IUL 2: The death benefit and cash value accumulation of this policy, paired with its flexibility are beneficial for retirees. This rider is meant to protect policyholders from their IUL policies imploding if their retirement loans (that they don’t intend to pay back) overtake the policy equity later in life. Are you an entrepreneur or professional age 25-60 decent health? ; In the second section, we get into the different indexed universal life insurance pros and cons, starting with the benefits. Indexed Universal Life was born, but was hardly a big seller yet. At Pacific Life, creating analysis for indexed products usually means you will see a graph they call a “Galaxy Chart”. Notice the crossover at year 3 between the actual cash value and the alternate accumulated value you would be entitled to if you were to terminate the policy. This article is separated into three sections. Take a moment to think of what could go RIGHT. In this low-yield environment, Pacific Life had a real dilemma on their hands. That means they will charge you 2.25% to borrow against your cash value, and simultaneously credit your cash value with…you guessed it – 2.25%. However, one of my unique gifts that God has given me is to make complex concepts simple to understand. This is a free provision that is automatically installed on every PDX policy. I’m not sure why that was deemed bad for consumers, but we can no longer do that. So, if you didn’t want to try to shoot the moon with any of Pacific Life’s domestic or international indexed strategies in some years, you could park all or part of your cash value into their fixed-interest account. Regardless, this contractual “back-stop” that removes the PDX’s controversial extra charges and promises at least some sort of modest crediting made me feel a lot more comfortable about the Pacific Discovery Xelerator. As of March 2018, their participating loan rate was 4.65% giving you plenty of room to achieve positive arbitrage even in today’s low cap environment. 2 … So when cash value goes down, then a smaller number on the bottom of that formula should produce a greater multiplier effect that year. So before we head into the weeds with algebraic formulas, this schematic below is how I was able to mentally simplify the Pacific Discovery Xelerator’s Performance Factor and wrap my head around it. S&P 500. This credit is just too darn favorable if Pacific Life’s desire was to extract all your premiums and leave you without a policy someday. Traditional Indexed Universal Life insurance products have contract language stating they can lower their IUL caps all the way down to 4% and triple their internal cost structure with the stroke of a pen. An Overloan Protection Rider essentially locks down what little cash value remains right before it gets eclipsed by the swelling loan interest. The insurance carrier also locks down a minimal amount of death benefit for your heirs to preserve the tax sanctuary of your lifetime distributions from the policy. Rather than get caught up in opinions and rhetoric, this review of the new Pac Life’s new Indexed Universal Life product will explore the facts. This was the $64,000 question for me. �;[��zIl�$rn�Ű��>�N���o��4S#����Jq8�σ�;K����g߄(���qR� y�`c�*�vvq� �]����U*�1����ݽ�� �>4���7�2���4iٕ#Ї6��쇿��� bo��\n�� However, due to the extra charges of the Performance Factor coupled with a top-end participating loan rate of 7.5%, you should proceed with caution when trying to achieve the same effect with the PDX. I sure liked the sound of the sizzle, but I needed to know more about the steak. The client also bears the additional expense risk if the insurance company happened to misprice their product, or if a market crash erases a big chunk of cash value needed to support the policy. Click here to learn how life insurance policy loans work and how they differ from traditional debt. These economics are very similar to a Whole Life policy run without dividends. BUT...It needs to be structured properly with a reputable company. Pacific Life has a consistent history of doing the right thing for their policyholders. That is how Pacific Life earns their keep. Pacific Life uses a higher schedule of charges at the onset of the policy if you elect an increasing death benefit. There is also a two percent guaranteed interest rate to protect the investment, but can accumulate at a higher rate with index fluctuations. Subject to state availability, the following will occur(see . With other IUL products, especially those with high caps and low participating loan rates locked in the 5%-6% range, it may be a worth attempting to achieve long-term positive arbitrage using participating loans for retirement income. So what did Pacific Life decide to do since they had one of the lower 1-year S&P 500 caps in the industry? Most of the top IUL carriers today have installed this type of feature inside their Indexed Universal Life products. IUL PLANS. !H-,�+�\?y�1Lh�g �*�W�W�^1���-Vu��d �2B�UC�?¢^pX§V�1$�G�Ī�\ kkU da�m� 1 Pacific Life Insurance Company’s Pacific Discovery Xelerator IUL 2 (Policy Form #P15IUL and S18PDX2 or ICC15 P15IUL and ICC18 S18PDX2, based on state of policy issue). Even the top IUL carriers were forced to keep scaling back their fixed-crediting rates as well as the caps on their different indexed crediting strategies. Hence, the Pacific Discovery Xelerator’s extra charges. Unlike with a traditional No-Lapse Guarantee UL policy, with PDX you can skip a premium and make it up to maintain the integrity of the rider. currency Mad Pepper was tossed around as a company name idea for Wink. Flexible, long-term life insurance providing death benefit protection and competitive cash value growth potential, which … Pacific Life also has a number of different 1-year S&P 500 strategies with varying caps and participation rates. Pacific Life Insurance Company, policy form #P15IUL and S18PDX2 or ICC15 P15IUL and ICC18 S18PDX2, based on state of policy issue. 1ST QUARTER TOP SELLING PRODUCTS BY CHANNEL: Overall- Pacific Life Pacific Discovery Xelerator IUL 2 Bank- Pacific Life Pacific Discovery Xelerator IUL 2 Career- Farm Bureau Life Foundations Indexed UL Click here to understand how a policyholder can better manage and offset this risk if any IUL carrier decides to increase their charges and cost structure within an Indexed Universal Life policy. So, they lowered their caps identically on all their IUL policies including the new offerings. You won’t get any more income, and you can’t touch the cash, but your heirs will still get a nominal death benefit that ensures no tax bill for the income you took over your basis in the policy. Unlike many carriers, Pacific Life staunchly maintains a “what’s good for the goose is good for the gander” philosophy when it comes to offering the exact same caps and indexed crediting strategies for both old and new products. The carrier absorbs all the risk and promises the policyholder steady guaranteed growth with the opportunity of earning additional non-guaranteed dividends. That said, I find that once clients understand how costs and risk can be quantified and managed, they are much more comfortable moving forward with a particular strategy. All companies that offer IUL reserve their right to increase their charges by more than triple. However, with the added variable of PDX’s Performance Factor, it appears that withdrawals may juice-up the Performance Factor more than the illustrated long-term positive arbitrage from the participating loan. Choose from the Pacific Discovery Xelerator IUL 2, Pacific Indexed Accumulator 6 (PIA 6), or Pacific Discover Protector IUL. The pure uncapped participation offered by VUL offered seemed to be a much more attractive insurance choice than IUL. Every Pacific Life’s policy has an 8th-year exchange provision. Click here to read more details from Pacific Life about these 125 different pricing improvements and the savings they passed on to consumers. Imagine if you could get those returns multiplied…on a 6-figure cash value account. Indexed Universal Life Insurance does not directly participate in any stock or equity investments. Pacific Life has a 2-year S&P 500 strategy with a 30% cap. Some are at 11%, 12%, 13%, even 14% (as of March 2018). “Why cap your upside in the teens when markets increase by 20%-30% every year?”, “Who needs a 0% floor? The latest addition to Pacific Life's line of IUL products is designed for death benefit protection with competitive long-term cash value accumulation potential after year 15. Thankfully, having placed sizable cases with Pacific Life in the past, they granted me some privileged meetings with executives and product design specialists to help me understand what was really going on with the new Pacific Discovery Xelerator. Pacific Life offers something called an Overloan Protection RIder. Source: Securian Financial Competitive Research June 2019 Securian Financial – Orion IUL – Index Option L; John Hancock - Accumulation IUL 18; Pacific Life - Pacific Discovery Xelerator IUL 2; Lincoln - WealthAccumulate IUL This comparison does not take all material factors into account and must not be used with the public. To be honest, Pacific Life’s Indexed Universal Life product fell out of favor for a couple of years until…. Since your cash value technically doesn’t go down with a policy loan, this would obviously not influence the Performance Factor. Some critical pieces you’ll find on the internet about the PDX accurately state that Pacific Life does NOT have a locked loan that still allows you to fully participate in their 1-year indexed crediting strategies. It is almost the same as buying term while building an emergency fund or saving to buy a house. Obviously having only a guaranteed death benefit with no cash value is far from ideal. Indexed Universal Life Insurance does not directly participate in any stock or equity investments. Take a look at the most volatile periods we can find in that 81-year period tracking the S&P 500 in the column titled “Annual Return %.”. This option is only available in year 8, but I am not aware of any other company that has a provision like this. The new Pacific Life policies are the Pacific Discovery Xelerator IUL 2 policy and the Pacific Indexed Accumulator 6 policy. Keep in mind that with the Pacific Discovery Xelerator you can mix and match any combination of these strategies together. One could even argue that the Pacific Discovery Xelerator may outperform VUL in good years if the Performance Factor kicked in while choosing either of PDX’s uncapped indexed strategies. This policyholder could surrender the policy for over 92% of your premiums paid in 15 years when run at 0%. Indexed life sales for the second quarter were $494.9 million , down 6.0% when compared with the previous quarter, and down 14.3% as compared to the same period last year. Click here to thoroughly understand all the pros and cons of Indexed Universal Life insurance. Also, Pacific Life’s fixed-interest loan is the lowest in the industry locked at 2.25% for the life of the policy. 2. how safe are life insurance companies? If, however, for some crazy reason all you had was that guarantee, you could at least spend other retirement assets more aggressively while you’re alive knowing that the contractual death benefit would fill up the bucket for your surviving spouse. VUL fell firmly out of favor, and IUL quickly became the product of choice for those looking to use life insurance for retirement and cash value accumulation. Why when the market only goes up?”. Beginning Feb. 25, 2019, Pacific Life Insurance Company is pleased to introduce Pacific Discovery Xelerator IUL 2 (PDX IUL 2) and Pacific Indexed Accumulator 6 (PIA 6). It offers death benefits and accrues cash value on a tax-deferred basis. 2. The fact that they are one of the largest companies offering Indexed Universal Life and also very highly rated makes it even easier. Substantially higher charges supporting this unique opportunity for additional indexed crediting, A mysterious formula as to how these credits will be applied. But before we unpack the bold claims and harsh criticisms regarding Pacific Life’s new product, let’s take a step back and look at the two extremes of insurance products that led to the evolution of Indexed Universal Life and eventually the PDX. 3. We reveal the formula behind the Pacific Discovery Xelerator’s controversial “Performance Factor" and discuss 5 viable exit strategies if Pac's new IUL's cash value can't outrun PDX's higher charges. However, I was told by multiple sources that the crux of the mysterious black box works like this: “It was my understanding there would be no math.” – Chevy Chase impersonating Gerald Ford on SNL. 5. Click here to see a telling 81-year study of the S&P Index movements from a third party financial company. Other insurance companies would likely step in to absorb a company contemplating this kind of radical move, as has been done in the past. Remember, any one of Pacific Life’s indexed crediting strategies can be multiplied to return well beyond their stated caps by the Performance Factor. % of your premiums paid in 15 years when run at 0 % any stock equity...: Certain loan and withdrawal protocol needs to be structured properly with a 30 % cap on their loan. 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