Lately we've been asking ourselves if given all the difference in policy features from company to company and policy to policy is it fair to spreadsheet to cash value life insurance?
And what is spreadsheeting anyway?
We should probably explain what we mean by that. It's the process by which we take all the data from various cash value life insurance illustrations and line it all up in a spreadsheet so that someone can easily compare their options.
Ironically, most of the time we already know who the likely winners are, but we often spreadsheet to help people understand the differences. Why do we bother doing that if we already know who the likely winners are going to be?
Mainly because the people we work with don’t get to see this sort of comparison every day, and since most of them have just met us, they aren’t likely to trust us that much right off the bat. It's our unique way of proving to you what we are telling you by showing you the numbers in an easily digestible format.
Well, as easily as it can be anyway. There's often still quite a bit of data to sift through but it's typically a much small pool than what we started with. But it can be a double-edged sword because people can get lost in the minutia and have a really difficult time making a decision.
However, it does allow us to quantify a certain company vs. another company and it allows us to illustrate that a specific company may not be the best option just because of some particular benefit.
What do I mean by that?
As an example, there are many times that people are absolutely convinced that using a participating whole life insurance contract with non-direct recognition is always better than using one with direct recognition of dividends.
But in reality, it's not an absolute truth. By using spreadsheets we are able to prove that mathematically and to get people over some of their pre-conceived notions.
Spreadsheeting does allow someone to compare whether or not the quantified benefit truly exists. For example, does a higher dividend rate mean you really get more money? In many cases it does not mean that at all.
The only way to really know what works is for any particular situation is to quantify the results of policies that are designed as similarly as possible. That's what we accomplish by spreadsheeting and why we're not likely to stop doing it any time soon.