Policy Cash Value vs Premiums paid

[Amaster05]

I'm trying to find out information for my mother regarding a Whole Life Insurance policy she has.

She started this policy roughly 10 years ago (I had no idea this whole time) and is in her early 70's. As her English is not the greatest either, the possibility that she may have been taken advantage of sits in the back of my mind.

I took a look at her account today and saw that she's been paying her premiums monthly, for the past 10 years.

But the Cash Value amount of the Whole Life Insurance policy does not match the Premiums she has been paying. The Cash Value amount is roughly $2,000 less than the total Premium amounts she has paid (i.e.: Cash Value of $27,000 and Total monthly premiums paid for 10 years = $25,000).

Where is this gap coming from? Just a note, I'm not too familiar with Life Insurance as well so I'm trying to help my mother out.

Also is it the policy of Insurance companies to mail out the Notice of Anniversary date on the exact Anniversary date? She wanted to change her policy but was told that she had to have done it before the anniversary date or wait until the next anniversary date. Well, she couldn't exactly do that as she didn't receive the letter until 5 days after her policy anniversary date.

Thanks in advance.

 

[nugget1tau]

Cash values don’t automatically equal cumulative premium outlay. It takes time for that to equal then at some point, cash values should then be greater than premium (few factors depending).

If you have any other questions feel free to reach out (pm).

 

[nugget1tau]

Also to answer your question about the anniversary, depending on the company, there should be a window before the date.

I would contact the company directly to find out how long is the window.

 

[DHK]

But the Cash Value amount of the Whole Life Insurance policy does not match the Premiums she has been paying. The Cash Value amount is roughly $2,000 less than the total Premium amounts she has paid (i.e.: Cash Value of $27,000 and Total monthly premiums paid for 10 years = $25,000).

Where is this gap coming from? Just a note, I'm not too familiar with Life Insurance as well so I'm trying to help my mother out.

Net Death Benefit = Net Amount at Risk + Cash Values - Any Outstanding Loans

I do not know the death benefit of the policy. But a policy has costs because of the gap between the cash values and the net amount at risk (insurance). That has a cost. That's where the gap is coming from.

Btw, according to your post, you have a $2,000 gain.
Cash values = $27,000
Premiums Paid = $25,000
Gain: +$2,000

However, let's assume that you simply transposed the numbers inadvertently for this post.
Cash Values = $25,000
Premiums Paid = $27,000
Net Cost of Insurance = $2,000 for 10 years OR a net $200 per year for the insurance.

 

[Amaster05]

Net Death Benefit = Net Amount at Risk + Cash Values - Any Outstanding Loans

I do not know the death benefit of the policy. But a policy has costs because of the gap between the cash values and the net amount at risk (insurance). That has a cost. That's where the gap is coming from.

Btw, according to your post, you have a $2,000 gain.
Cash values = $27,000
Premiums Paid = $25,000
Gain: +$2,000

However, let's assume that you simply transposed the numbers inadvertently for this post.
Cash Values = $25,000
Premiums Paid = $27,000
Net Cost of Insurance = $2,000 for 10 years OR a net $200 per year for the insurance.

Apologies, I flipped the numbers by mistake.

The Cash value is $25,000 and the Premiums Paid is $27,000.

 

[Amaster05]

Cash values don’t automatically equal cumulative premium outlay. It takes time for that to equal then at some point, cash values should then be greater than premium (few factors depending).

If you have any other questions feel free to reach out (pm).

If that's the case, I'm wondering when that is.

My mother has had the policy for close to 12 years now but there is still a gap of $2,000.

 

[billyb]

She wanted to change her policy but was told that she had to have done it before the anniversary date or wait until the next anniversary date.

What does she want to change? Things like beneficiary or ownership can be done anytime. If she wanted to increase her face she probably can't. Will have to apply for another policy and be underwritten. You are aware that if she died you only get the face amount not that and the cash value?

 

[STIBROKER]

If that's the case, I'm wondering when that is.

My mother has had the policy for close to 12 years now but there is still a gap of $2,000.

If this is a participating whole life then the average break even date is usually 15 years.....

 

[AboutThatLife]

If this is a participating whole life then the average break even date is usually 15 years.....

20-22 for Foresters.

 

[Robert Barney]

Apologies, I flipped the numbers by mistake.

The Cash value is $25,000 and the Premiums Paid is $27,000.

Insurance coverage "costs" money. Had your mother died, the policy would have paid the face amount. Where does that money come from?

Did you mention what the face amount was?