Prudential BenefitAccess Rider?

[ChiGuy1215]

Hey everyone,

So I had a chat with my insurance agent who I purchased disability insurance about 10 years. I was offered the following:

500K benefit, no cash surrender value

10 years x $5000 = $50000 total premium paid

If 2 ADLs are not met at anytime (transferring, toileting, bathing, dressing, etc) , then can access 10K per month tax free until benefit runs out ~4 years.

Unlike disability insurance which ends at age 65, this policy would go until death.

Premium for 10 year changes of course with higher benefits

 

What are your thoughts?

[DK Unger]

I am familiar with Prudential's GUL policy with the BenefitAccess Rider as some of our older clients have it.

If you look at the numbers, it is clear that it provides value.

To use your situation as an example:

With the initial payment of $5,000, you and your family are immediately guaranteed $500,000 or portion thereof in the event of death or need for long term care. For a total deposit of $50,000 you are guaranteeing that $500,000 or a portion thereof will be available to you and/or your family. It is important to note that you do not need receipts to access the death benefit for long term care. Yes, that means you can pay a family member to take care of you.

As an alternative, if you were to instead deposit $5,000 at the beginning of each year into an account earning an annual return of 5%, then in 10 years your account will grow to $66,034 before taxes. If you were to then take that $66,034 and deposit it into an account earning an annual return of 5%, then it would take 42 years for your account value to reach $512,529 before taxes. After taxes, the account value would be less than the total benefit provided by the Prudential GUL policy with the BenefitAccess Rider.

Since the insurance money will return to you and your family due to LTC or death, they are a popular consideration for people in their mid-40s to mid-60s.

 

 

[ChiGuy1215]

So looking at numbers, compounding interest annually for 5K added per year over 10 years is total of ~$72-74k. Thus I would have nearly 20K more by investing in something else. Then without adding anything for the next 40 years at %5, I would be at $506K at age 85 which about equals the policy.

I certainly am not comparing to higher interest. I understand if I average 7% over 40 years as an example it would be like 1 million. I already max out my Roth IRA backdoor, 401K to 58k, and do passive index funds at Vanguard around 30K per year.

So what are the drawbacks to the policy otherwise than the opportunity $$$ cost?

[DK Unger]

 

 

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