Argument against Permanent Life Insurance: High Commissions Paid to Agent

It seems one of the biggest reasons you should not buy whole life or universal life insurance is because the agent or broker who sold it to you will get paid to do so. At least this is a claim made in almost all of the articles ever written in an attempt to steer you away from these insurance products.

In what has to be the most ad hominem of all the arguments against permanent life insurance, the amount of money I make (or don’t make) takes center stage—I wonder how many of those folks wrote their article for free like I am this one right now.

Keep Reading

Should you Stop using Life Insurance Illustrations to Compare Policies?

When it comes to evaluating life insurance contracts for a potential purchase, a common tool used in analyzing policies is what the industry calls an “illustration.” The illustration is several pages of policy feature details and numerical details projecting policy values to the maturity date of the policy (generally the insured’s age 120 for policies issued since c. 2006).

But some have suggested that these so-called product illustrations should not be used to compare one policy against another and cite numerous sources who allegedly agree with their aversion to such a use for illustrations.

Should you be wary of a comparison that uses policy illustrations to make definitive or initial comparisons among possible products? And if these illustrations aren’t used to make comparisons, what does one use to discern the differences from one policy to another?

Keep Reading

Do 80% of Whole Life Policyholders Cancel their Policies?

Spend any time looking around the internet for reasons not to buy whole life insurance and you’ll inevitably land on pages claiming that 80% or more of whole life purchasers cancel their contracts.

The inference here is that with such a high rate of cancellation those who bought before you learned something you’ve yet to uncover, so save yourself the time, money, and heartache and just skip on down to the next idea.

Sounds reasonable…if only it were true.

Keep Reading

2015 Whole Life Insurance Dividend Analysis

You can find the latest Whole Life Insurance Dividend Analysis here.

In 2013 we released the industry’s first public analysis on variation in dividends for major participating whole life insurance products. This analysis focuses on variation and trend of declared dividend interest rate at the seven most competitive life insurers who issue participating whole life and will publicly announce/disclose their dividend interest rate (more on this point later on).

We’ve long argued that this sort of analysis is the best gauge of potential cash value performance in a whole life policy because it allows us to review how the company has managed business and investment operations given the axiomatic assumption that these life insurers will move heaven and earth to deliver the highest dividend award to participating policyholders. This foundational assumption has substantiating legal precedents.

Keep Reading

An Indexed Universal Life Insurance Success Story

I was recently reviewing an indexed universal life policy issued seven years ago. We do a lot of reviews for life insurance policies (especially the ones we ourselves put in force for people) and such reviews look at performance to date as well as a comparison to the original policy projection to review how things have unfolded.

For a lot of policies, there’s little variance from the original projection. This is especially true on the whole life insurance side of things since dividends don’t tend to vary all that much (a few exceptions exist for policies we’ve been asked to review we didn’t have a hand in putting in force).

Not all that surprisingly the indexed universal life insurance policies have tended to do better than the original projections.

For the policies we’ve put in force, this is commonly due largely to our insistence on assuming a 6 to 6.5% annual index credit (a lot of less honest agents/brokers like to use numbers in the mid 7 to 8% range, though recent legislation is changing that).

The market has enjoyed a pretty good run since 2008 and indexed insurance products have certainly benefited. As a result, I often get asked what happens if the policy performs better than the 6% number I assume, to which I always point out, you’ll simply have more money.

This is great in theory, but a lot of people have a hard time grasping what that means in a more concrete sense. So today we’ll review publicly a policy that has been in existence for almost a decade and see how it has performed.

Keep Reading

Five Year Asset Growth Indexed Universal Life Companies

Insurance company asset growth is a measure of overall company success in accumulating assets. It’s a metric that certainly indicates positivity when the trend is upwards, but there are a few nuances that we have to keep in mind before ambitiously declaring a winner.

Insurers can accumulate assets either through the new business process (i.e. selling new policies and collecting more premiums) or through superlative investment performance. In either case, an upward trend is almost always favorable, the difficulty comes in trying to determine how much of an upward trend matters when looking at results from multiple life insurers.

Keep Reading