Cash Value Increased Less Than Premium

You didn't post your numbers, but I know that pretty much all the policies I design will have more cash value by around year 10 than total premiums paid in, sometimes sooner.

No. The cash value on my wife's policy, for example, is $169,104, which is $15,136 less than the $184,240 premiums paid in over 10 years. And the disturbing thing is that the cash value went up by less than the premium, so that difference is larger than last year. That is what has me concerned.

As far as letting the policy pay for the premiums, unless you are in a situation where you can't afford the premiums...I personally think that is not a good idea. Now if you are planning to retire at this point, well time to examine your options.

We can only afford the premiums by taking money from other savings. I don't mind doing this if I get a positive "return" on the premium amount, but if the cash value and death benefit don't go up by more than the premium amount, I'd rather leave the money in my investment account.

The point I was making is if they were cruising along previously, you want to check their site out for any information on any single event that would have reduced that expected number. A large write off, did they "buy" another company, is there a one time thing they did that would effect how much gets paid out? If there is, then you have to figure it is it a bad thing long term or a good thing long term.

It would help if you could tell us what type of policy you bought. thanks.

I can't tell anything from looking at their website. My agent is inquiring with Lafayette and hopefully I'll know more next week.

My policy is a Lafeyette Life Patriot, with "Level Premium Paid-Up Additions Rider" and "Waiver of Premium Disability until Year 11", with dividend option "PUA", according to the "Inforce Illustration" provided by my agent. The annual report I received that shows the amount of insurance and cash value also indicates "Accelerated Benefit Rider", "Waiver of Premium Benefit" and the dividends are "Used to Buy Paid-Up Additions".

As I indicated, for the first time since we started the policies, the death benefit went up by less than the premium amount and the cash value went up by less than the premium for the first time since Year 6 (both policies). I thought we were over the hump with CV.

Thank you all for your help. As I said, my agent is checking with Lafayette to get an explanation.
 
My wife and I both have Lafayette Life whole life insurance policies that have been in effect for 10 years. For the first time in many years, the cash value and death benefit increased less than the premium amount. I thought by now the CV and death benefit would always go up by more than the premium. I asked my agent, and she is looking into it. I need an answer to help decide whether to keep paying the (hefty) premium or to stop paying and let the premium be paid by the policy.

For the last several years, I haven't minded paying the premium, thinking that the CV was increasing by more, but this new wrinkle has me concerned.

I hate to make a blanket statement here, but if designed correctly it really shouldn't be happening. Typically even the guaranteed column should have positive gain here. There is one scenario that might make that happen that i can think of, but again, only if there is a design flaw.

Do you have the original illustration?
 
I hate to make a blanket statement here, but if designed correctly it really shouldn't be happening. Typically even the guaranteed column should have positive gain here. There is one scenario that might make that happen that i can think of, but again, only if there is a design flaw.

Do you have the original illustration?

Just a guess, but, I would guess it has to do with Dividends and not the guaranteed cash values. There is more to this than we are being given. I would like to hear what the agent comes back with and what the inforce looks like.
 
Just a guess, but, I would guess it has to do with Dividends and not the guaranteed cash values. There is more to this than we are being given. I would like to hear what the agent comes back with and what the inforce looks like.

Be interesting for sure. As I said, the guaranteed values should be enough to increase cash by premium in 10th year +.

Also could be the term rider structure. Not sure which one they used, but if illustrated it longer than rider, for instance 10 years on a 7 year rider, to avoid MEC, the term rider cost could be eating up the growth. Some companies will eat that if you pay it from policy values, but if you don't, it's coming from your premium dollars.
 
Be interesting for sure. As I said, the guaranteed values should be enough to increase cash by premium in 10th year +.

Also could be the term rider structure. Not sure which one they used, but if illustrated it longer than rider, for instance 10 years on a 7 year rider, to avoid MEC, the term rider cost could be eating up the growth. Some companies will eat that if you pay it from policy values, but if you don't, it's coming from your premium dollars.

I did not see any mention of a term rider. Wonder if it could not be a UL?
 
I did not see any mention of a term rider. Wonder if it could not be a UL?

That's why I'd like to see it. We've reviewed lots of these things and many times the client would respond to a term rider question with "What is that?".

I'm going to hold my tongue till I hear more...

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I did not see any mention of a term rider. Wonder if it could not be a UL?

A Lafayette UL that is 10 years old wouldn't have increased more than premium up until now.

Hope op comes back. Got me intrigued.
 
That's why I'd like to see it. We've reviewed lots of these things and many times the client would respond to a term rider question with "What is that?".

I'm going to hold my tongue till I hear more...

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A Lafayette UL that is 10 years old wouldn't have increased more than premium up until now.

Hope op comes back. Got me intrigued.


Until he post back we will not know. FYI, I have issued some ULs in the past that we 1035'd into with on going premiums that did very well in the first ten years or so. To many variables to guess.
 
I hope the OP comes back and lets us know what he found out.

I'm in agreement that by year 10 if designed properly, it should definitely increase more than the premium - even on the guaranteed side. Doesn't make sense. Really, it should be happening much earlier than that, even with NO dividends being paid ever.
 
I'm back, but haven't found out much more. I still haven't heard an explanation from my agent or Lafayette Life. We do/did not have a term rider, as a couple of you mentioned. It is also not universal life. I dug out the policies - both policies are labeled a Lafayette Life "The Patriot - Permanent Whole Life Insurance Plan (Policy form WL-89-75-PA)"

On my policy, I have the following riders: a) WPD - Waiver of Premium, stop year 22; b) LPUA - Premium Paid-up Additions Rider, stop year 17; and c) ABR92 - Accelerated Benefit Rider Imminent Death, stop year 57.

According to the illustration when it was issued (Non-Guaranteed), the CV should have started increasing by more than the premium in Year 7, and then keep increasing. In reality, the CV went up by more than the premium in Years 7, 8 and 9, but dropped back down to less than the premium in Year 10. The CV increase was larger than expected in Year 9, and less than expected in Year 10.

In reality, my premium has been a bit less than was indicated on the original illustration. All in all, the illustration is pretty close until this year - Year 10. The CV and DB were projected to increase by $3,000 and $10,000 more than my latest Annual Report shows.

My wife's original illustration was based on stopping paying premiums after Year 7, so it doesn't match what has happened. She has plenty of other life insurance, so I think we will indeed stop paying her premium, and let it be paid out of the dividends and cash value.

Thanks again for your help.
 
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