IPB Podcast Episode 002: Life Insurance Policy Design

Did you know that not all life insurance policies were created with the same intention? No, I'm not referring to the difference between whole life insurance and term life insurance.

That's a pretty obvious difference.

What's less obvious is the difference that exists between different whole life insurance policies. And that complexity actually exists on two levels.

  1.  A whole life policy issued by Mutual of Omaha isn't going to accomplish the same cash value growth intention as one issued by Mass Mutual.
  2. Deeper down the rabbit hole–let's consider a common whole life product that's sold by Mass Mutual, the Legacy 100. Two agents can both show you a Legacy 100 policy and get different results. As a matter of fact, we've discussed this issue before: The Third Dimension of Cash Value Life Insurance.

That being said, there's a certain degree of creativity and knowledge that a competent agent must possess to make a policy hum…if the intended goal is to maximize the return on cash.

There is a coordination of rules that come into play. Each company has its own internal rules/guidelines as to what they allow and the various regulatory agencies also have rules. We have to be aware of both.

It's All the Same…Right?

You would assume that any life insurance agent that comes knocking on your door would understand how this all works…right?

We wish that were the case. If it were, we'd see a whole lot less policies that were poorly implemented. We'd also see a lot fewer unhappy people that have watched many thousands of dollars evaporate to pay for things they didn't want.

What you will find out when working the typical agent (one who doesn't have a real working knowledge of policy design) is that they can't adequately explain how it all works.

I know it's all to popular in the insurance industry to adopt a “I don't build'em, I just fly'em” sort of bravado. That's okay for some things. I don't really need to know how a pair of Alden shoes are built down to the cork bed insole.

I can accept the fact that they last a long time, wear incredibly well, and are easily restored by the manufacturer.

But I'm only going to shell out a few hundred bucks for them.

However, when you're talking to someone who's thinking through a multi-year commitment of $50,000 per year going into a life insurance policy, there's a chance they're going to have some questions about the details.

That's not unreasonable. It's a decision that should be deliberated a bit and more than anything, you (the client) should feel comfortable with understanding that you're making the best decision for you.

The Example We Mention in the Episode

I hope you'll listen to the entire episode to hear more of our commentary. As usual, we're not at a loss of things to add to this conversation.

If you think we may be able to help you, please contact us, we're more than happy to hear from you.


4 thoughts on “IPB Podcast Episode 002: Life Insurance Policy Design”

  1. my whole life policy from mass mutual was just started in 2014. i pay 33,000 (rated table C) per year for 12 years. I am 54 at the end of this year. I will have 313,760 guaranteed at 65. Do you want to do a comparison for me?

  2. It was great listening to the podcast Mr. Whitley. I think people should invest in researching more about the policies and what they imply, rather than just putting it all on the agent. Most clients just sign up for policies, just because a friend or colleague has advised them to do so. An expert opinion from a finance professional or a tax lawyer could work wonders.


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