On Average, Do Whole Life Policies Underperform or Outperform (historically Speaking)

[mikichan]

This is just a question that might not have a good answer, but one thing I noticed when I was looking at life insurance ---

In a 2009 "Full Disclosure Report - Actual and Illustrated Participating Whole Life Historical Performance" that compared several companies, it looked like everyone's actual performance (cash dividends, cash value, death benefit) performed less than illustrated -- though some were worse than others.

But in a Mass Mutual brochure an agent gave me, they had sample 250K policies issued in 1980, and actual performance beat the illustrations.

And in an actual Northwestern Mutual policy I have, actual performance has also beaten the illustrations (I thought it had not, but recently took a closer look, and realized the current cash value was better than year 8's non-guaranteed end value, even though I am still in year 7).

Just wondering why the difference? Mass Mutual probably cherry picked which policies to show, but it got me wondering which was right.

For people with Mass Mutual, Northwestern, Guardian, Penn Mutual policies, what has been your personal experience?

I know past results don't mean it'll do well in future, but am just trying to resolve conflicting info.

 

[BNTRS]

The Blease reports (what you're most likely quoting here) show us why design is everything, and where the "Insurance isn't a suitable savings vehicle" miss-information catches traction. Blease is showing us what happens when you buy a certain amount of life insurance and let the the dividends build up some cash. This is a lot of agents do, because they don't know how to do anything else. They don't really know what a PUA is, they've no clue how blending works, no clue what a qualification test for life insurance means, and can't even tell you what CVAT and GPT mean as acronyms.

Now, is it true that interest assumptions where way higher 20 years ago and this threw the actuals a good bit lower? Absolutely. Here's the other goods new, inflation has been way lower than assumed as well. And even base WL is beating it (based on ALL of the 20 year IRR's from the Blease numbers).

I could fill you're desk with policies I've written that have outperformed their illustrations. Again, the success or failure of this stuff lies 100% with the competency of the agent who is writing it.

This is why if your talking cash accumulation, and all the money is going into base premium, you've got the wrong design.

 

[WPM]

Again, the success or failure of this stuff lies 100% with the competency of the agent who is writing it.

Amen Brother! If only more consumers understood this.

 

[Chuckles21]

So much depends on when the policy was taken out, how it was structured and what interest rates were like at the time.

 

[chaos]

Are you sure you're not referring to universal life policies instead of whole life? Most all whole life policies require no illustrations because performance is fixed and guaranteed. UL's on the other hand rely on interest rate assumptions that of course will vary. Many companies were sued after agents sold UL policies in the 80"s when interest rates were very high and when rates came back to earth the policies collapsed. We are in such a low interest rate environment now that should not be a concern. Most UL's current rate illustrations are not much better than their guaranteed lowest rates.

 

[VolAgent]

Are you sure you're not referring to universal life policies instead of whole life? Most all whole life policies require no illustrations because performance is fixed and guaranteed. UL's on the other hand rely on interest rate assumptions that of course will vary. Many companies were sued after agents sold UL policies in the 80"s when interest rates were very high and when rates came back to earth the policies collapsed. We are in such a low interest rate environment now that should not be a concern. Most UL's current rate illustrations are not much better than their guaranteed lowest rates.

Seriously? Are you clueless or just spamming us?

 

[BNTRS]

Are you sure you're not referring to universal life policies instead of whole life? Most all whole life policies require no illustrations because performance is fixed and guaranteed. UL's on the other hand rely on interest rate assumptions that of course will vary. Many companies were sued after agents sold UL policies in the 80"s when interest rates were very high and when rates came back to earth the policies collapsed. We are in such a low interest rate environment now that should not be a concern. Most UL's current rate illustrations are not much better than their guaranteed lowest rates.

If you are an agent, you are a prime example of where the system has failed, miserably, to vet crap like this from making its way into the homes of unsuspecting people all across America.

Again, the success or failure of this stuff lies 100% with the competency of the agent who is writing it.

Congratulations, you said something so insanely inept I decided it was fitting to quote myself.

 

[jdeasy]

How does the agent design and structure a whole life policy? It seems that you guys are talking about UL and not whole life.

 

[Larry Tew]

How does the agent design and structure a whole life policy? It seems that you guys are talking about UL and not whole life.

Do you use a policy with a premium at minimum levels (emphasizing death benefit)...

or do you use a policy with MEC or near MEC premium for minimal DB and high CV...

or instead of using a policy with a built-in high near MEC premium, do you use a balanced policy with a middle of the road premium and add a paid-up adds rider to bring the premium to the MEC limit.

Do you use a level PUA rider contribution to age 65...

or do you max the PUA rider for 7 to 10 years then throttle it back to keep it below MEC.

Or do you start with a Variable PUA rider to allow for reductions and catch-ups in the PUA rider contributions down the road.

 

[Fisher]

This is a lot of agents do, because they don't know how to do anything else. They don't really know what a PUA is, they've no clue how blending works, no clue what a qualification test for life insurance means, and can't even tell you what CVAT and GPT mean as acronyms.

I've got some clues but not as much as I would like. Where is a good starting place for expanding my knowledge?