Whole Life Insurance Lapse Rates

Whole Life Insurance Lapse Rates

If you spend anytime around a traditional life insurance agent/broker discussing which type of life insurance you should own, then you’ve undoubtedly been told to opt for whole (or universal) life over term life insurance. And one of the most commonly used statistics to build the case for owning permanent life insurance over term life insurance is the fact that less than 1% of term life insurance policies ever pay a claim.

Sounds like a waste of money to pay all those premiums to an insurance company knowing there’s a 99% probability that your policy will expire before you do…right?

In fact, the old follow-up point to presenting this statistic to a prospect was to note somewhat glibly, “of course it’s so cheap, when you design a product to almost never work you can pretty much give it away.”

No manipulation in that statement at all (can you feel me rolling my eyes?).

So much time is spent focusing on the slim odds of a death benefit payout probability that most people forget to ask the naturally obvious follow up question:

What percentage of whole life insurance policies pay a claim?

This statistic isn’t widely quoted by life insurance agents, and I’ll propose a theory later on that might shock a few people.

So what’s the answer? A lot lower than you might imagine.

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Life Insurance Companies Love the Estate Tax

Life Insurance Companies Love the Estate Tax

I bet you didn’t know how much the life insurance industry really loves having the estate tax stick around?  Yes indeed…according to a recent report on the fox business channel, life insurance companies spent $60 million in the last six months lobbying for the estate tax to stick around.

Why in the world would they do a crazy thing like that?

Well, you see selling large permanent life insurance policies to people who have estate tax issues is a tried and true business model for life insurance companies.  In fact, the clip from Fox points out that life insurance companies generate a significant amount of revenue as a result of the estate tax sticking around.  They say in the interview that the revenue generated by life insurers is 66% of what the federal government takes in for estate taxes.

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Life Insurance Companies Hate Being Compared

Life Insurance Companies Hate Being Compared

It’s our practice to compare all the companies that may have a chance of providing the best solution for our clients.  Some people have a preferred bias toward using participating whole life insurance as their choice for cash value life insurance while others lean more toward using some type of universal life insurance.

Quite honestly, we don’t feel there’s a right or wrong answer here.  Both types of policies will work well with a cash accumulation strategy so long as the policies are structured properly.

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Do we need more life insurance agents: Northwestern Mutual to Hire Over 5,000 This Year

Do we need more life insurance agents

A couple of days ago this headline appeared on my google alerts that are automatically shuffled to my inbox.  I thought sure this is a mistake.

But no, it’s not…here’s a link to the story so you can read all about Quiet Company’s grand plan.

The official word from Mother Mutual is that they had a banner year for recruiting in 2012, hiring over 5,000 new agents or as they call them “financial professionals”.  So, naturally they gotta raise the bar…right?

Keep ReadingDo we need more life insurance agents: Northwestern Mutual to Hire Over 5,000 This Year

The Retirement Income Opportunity has arrived

The Retirement Income Opportunity has arrived

If you've read any of my previous posts, it's no big surprise to you that I'm very passionate about the subject of retirement income.  Honestly, I think this is one of the biggest boondoggles for financial advisors, investment companies and life insurance companies.

None of them have been prepared for the growing demand that is now upon us to help our clients distribute their accumulated wealth in the best way during their retirement.

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Life Insurance Company Ratings–Do They Matter?

Modified Endowment Contract

The last few years have certainly seen an unprecedented amount of chaos in the global financial markets. And life insurance companies have not been immune to the aftershocks. We all know that in large part, the turmoil was caused by the collapse of the derivatives market.

All of the financial unrest has lead to a much greater awareness and concern regarding life insurance company ratings, overall financial stability and how the carriers are being overseen by third party rating agencies.

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