Argument against Permanent Life Insurance: Lack of Fee Disclosure

whole life insurance black box

In our final installment of the five most common arguments made against permanent life insurance we’ll take on fees or the lack of a discussion about fees, as high fees were already discussed.

The claim here is that life insurance contracts are very non-transparent regarding fee disclosure and you never really know what you are signing up for until long after you paid several years worth of premiums.

This argument, like several others, isn’t entirely unfounded. But it takes a large degree of liberal interpretation to the extreme.

The Black Box…an Annoying Aspect to Whole Life Insurance

The poster child of non-transparency in the life insurance industry is whole life insurance. It’s been colloquially called the “black box” for years for its general lack of disclosure. Not so much about how various pieces and parts are calculated, but more so for the walls built around anyone’s attempt to reconcile results.

Or at least this is what many would have you believe.

In truth, it’s rather easy to compute expenses associated with whole life insurance. Life insurance illustration ledgers have been a compulsory step in the life insurance sales process since the early to mid 90’s in almost ever state and those ledgers explain a lot in terms of what the insurer is doing and plans to do with your money.

While it may be absolutely true that one cannot request a detailed breakdown of expenses under a whole life contract and compare it against other whole life insurance contracts. One can very easily look up ledger details and compare both guaranteed and non-guaranteed values for whole life policies to discern which ones come at a lower cost.

While some people may not want to perform analysis in this way, it’s no different than looking at a schedule of expenses to see who charges more for what. This view is simply bigger picture.

Universal Life Insurance: The Full Disclosure Product

Universal life insurance, on the other hand, has made expense disclosure a foundational component to policy comparison for decades. One can easily pull up reports that details the expense breakdown of a universal life insurance contract and compare it among all of the other universal life insurance options.

Lack of Disclosure or Lack of Effort?

Life insurance, just like any other industry, has its own set of rules and customs. Ignorance of those rules or customs is not evidence of an industry that seeks to take advantage of you.

Information and services that seek to help people review their options as it relates to life insurance purchases are fairly plentiful. This entire web site does a pretty good job of that—so I’m told on a regular basis.

Unfortunately, not all life insurance agents are going to go out of their way to make you aware of the fact that you have other options. But one or even a collection of agents’ unwillingness to disclose information is not evidence of an industry’s lack of willingness to disclose information.


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