Annual Renewable Term

[VolAgent]

You should have read further into the report Bob. A lot of interesting data about what actually lapses and when.

It isn't the guy buying a $100,000 whole life that is causing the lapses, it is those FE sized policies that drive the lapses. Now, since they do look back about 20 years, a $5,000 policy was much larger then.

 

[scagnt83]

which says:

The overall lapse rate for whole life plans, all policy years combined, was 3.4 percent on a policy basis and 4.1 percent on a face amount basis for the current study, down from 3.5 and 4.4 percent, respectively, for the prior study.

The total lapse rate for term insurance, all policy years combined, was 6.6 percent on a policy basis and 5.7 percent on a face amount basis, a decrease from 7.0 on a policy basis and 6.2 percent on a face amount basis from the 2003–2004 experience period. Lapse rates on policies at the end of the
guaranteed level premium period — shock lapse rates — ranged from an average of 22 percent for 5-year level premium term to 37 percent for 10-year level premium term on a policy basis.​

While you would expect term policy lapses to be higher than whole life, the point is that whole life lapses are clearly too high for a product that people are supposed to keep for their "whole life". Why so high, because the product is sold to people who don't need it, and when they find out, they quit. And the cost of quitting is extremely high, considering that the first 3 years of premiums are lost paying the costs of acquiring those policies, including the extremely high commissions paid to the agents who sold them.

A 3%-4% lapse rate is not high in most peoples opinion. Both Term and WL have excellent lapse rates considering that life insurance is not a "legally required" insurance product. 96% of people keep their WL policy. 93% of people keep their Term policy until end of the term. That speaks volumes for life insurance as a product imo. Even in bad economies the overwhelming majority of responsible people still manage to keep their life insurance policy in force.

WL vs. Term aside. I dont know how you could consider a 3% - 4% lapse rate high Bob?

btw, that is one of my favorite studies/reports within the life insurance industry. I know it well and agents can learn a lot from it. It is nice to see you cite an extremely professional and reputable source.

 

[Larry Tew]

Robert Burns said "A man convinced against his will is of the same opinion still". You guys are arguing with someone who can only answer a question WITH a question.

I had moved on from this thread except that for at least a couple of posts, RB has predictably referred to those that don't think like him as "whole life PEDDLERS". And we all know that the definition of "peddler" is anyone who doesn't see it my way.

I recently had a family member pass at age 82. They were not wealthy, and life insurance was going to be very important for them. I sold them a smallish WL in 1990 at their age 58. I could have sold them a 20-year term for less premium (or more DB for the same premium). But since they went and lived beyond the 20 years, it seems that WL was the better way for them.

But unlike RB, who has a vested interest in promoting the cheapest term, I am free to use both, which I do on almost every case. Let's be honest here. When your only tool is a hammer, you're forced to see every problem as a nail. As far back as I can remember, we've had "hammer peddlers" like Jane Bryant Quinn, Charles J. Givens, Art Williams, Suze & Dave, and RB.

You guys are arguing with someone who would rather eat a turd sandwich than lose an argument. He lives for the controversy

 

[VolAgent]

Robert Burns said "A man convinced against his will is of the same opinion still". You guys are arguing with someone who can only answer a question WITH a question.

I had moved on from this thread except that for at least a couple of posts, RB has predictably referred to those that don't think like him as "whole life PEDDLERS". And we all know that the definition of "peddler" is anyone who doesn't see it my way.

I recently had a family member pass at age 82. They were not wealthy, and life insurance was going to be very important for them. I sold them a smallish WL in 1990 at their age 58. I could have sold them a 20-year term for less premium (or more DB for the same premium). But since they went and lived beyond the 20 years, it seems that WL was the better way for them.

But unlike RB, who has a vested interest in promoting the cheapest term, I am free to use both, which I do on almost every case. Let's be honest here. When your only tool is a hammer, you're forced to see every problem as a nail. As far back as I can remember, we've had "hammer peddlers" like Jane Bryant Quinn, Charles J. Givens, Art Williams, Suze & Dave, and RB.

You guys are arguing with someone who would rather eat a turd sandwich than lose an argument. He lives for the controversy

Oh, I'm not arguing with Bob. I know better, as I said earlier, I don't argue with crazy.

But I do find the study interesting. It actually doesn't support Bob's position at all.

Lapses are very much in the first few years and they are driven by those under age 30 or buying very small policies. It also shows what I have always known, quarterly is the worst way to pay. It lapses more than any other way. Monthly and annual are pretty much tied for best.

 

[scagnt83]

Robert Burns said "A man convinced against his will is of the same opinion still". You guys are arguing with someone who can only answer a question WITH a question.

I had moved on from this thread except that for at least a couple of posts, RB has predictably referred to those that don't think like him as "whole life PEDDLERS". And we all know that the definition of "peddler" is anyone who doesn't see it my way.

I recently had a family member pass at age 82. They were not wealthy, and life insurance was going to be very important for them. I sold them a smallish WL in 1990 at their age 58. I could have sold them a 20-year term for less premium (or more DB for the same premium). But since they went and lived beyond the 20 years, it seems that WL was the better way for them.

But unlike RB, who has a vested interest in promoting the cheapest term, I am free to use both, which I do on almost every case. Let's be honest here. When your only tool is a hammer, you're forced to see every problem as a nail. As far back as I can remember, we've had "hammer peddlers" like Jane Bryant Quinn, Charles J. Givens, Art Williams, Suze & Dave, and RB.

You guys are arguing with someone who would rather eat a turd sandwich than lose an argument. He lives for the controversy

I only bothered asnwering because he cited a source other than yahoo answers. However, if he reads the report in full it is a glowing case for owning both WL and Term insurance. But mainly for WL.

It is also a glowing case for selling/owning a fully underwritten policy over a SI/GI policy.

15 year term lapse rates hit 80% at year 16.... and one of the fastest growing demographics that is purchasing GUL & 15y/20y term is the 55-65 crowd.

The statistics show that consumers still need coverage after age 65. And they are waiting to secure coverage for retirement until they are the most expensive ages to buy life insurance.

This is why a permanent policy with an increasing DB can be a good solution when combined with Term. The permanent policy will have grown to cover a portion of the need once the Term expires. If you do the math over the long term, having a small permanent policy combined with term to supplement makes financial sense from an expense standpoint.

 

[Robert Barney]

For most, the idea of retiring at age 65 is a pipe dream. But then I remember a life insurance company in Canada, who loved to sell whole life policies, advertising that buying their whole life could help you retire at 55:

https://www.youtube.com/watch?v=lUr9aNqyzbg

It prompted me to write an article I titled "Freedom 55 - More Like Survival 65". I wrote that over 20 years ago.

One of my more recent articles talked about the fact that I aggressively save for retirement (I don't use life insurance) and yet I still plan to work until I'm dead. The thought of relying upon a pot of money to get me through until I die is worrisome and it will keep me working as long as I am able. My IRA is a disability fund.

The only people who are actually retired and comfortable with their retirement income are either the very wealthy or the very ignorant. The percentage of American seniors relying upon financial support from there children is huge, and some of them got into that shape wasting money on whole life policies thinking they would leave a legacy for their children. Ironic really, but they remained ignorant until the money ran out, relying upon the advice of the guy who peddled them a whole life policy.

I don't disagree that some people may need life insurance beyond 65, to cover income, because they are still working, but that "need" is nothing compared to the insurance need of a young breadwinner whose family depends on that paycheck.

Providing that you have saved properly for retirement, and you die, your spouse inherits the retirement fund and there is now only one mouth to feed instead of two. The surviving spouse is not in the same pickle they would have been in with young children, big debt, and no income. And certainly not in the same pickle had two people tried to live on those savings, versus one.

I wrote another article recently titled "Never Can Same Goodbye" to point out that many people who have been buying term life insurance have trouble letting go of it as they approach retirement. They are so accustomed to having it that its like a "blankey" which addresses an emotional need not a real financial need. Many term life sellers exploit that, selling people in their 60's a 20 year term that is obviously coverage for too long. People in their 60's are sometimes in denial about the fact that their lives are going to change radically in the next decade or two.

People spending money on term policies in their late 60's and through their 70's are not very wise. The money spent is money gone, and I just don't see the need. It would be better to save those dollars because the problem is not dying, it's living.

Most people who have a small whole life policy later in life may seem to have been smart, but in truth those folks probably were badly under insured during the years when they really needed life insurance, and their families are just real lucky they didn't die.

Listen to the story of the two young widows in this news program, and listen to the vice president of marketing for London Life (you know, the Freedom 55 crew) trying to explain the conduct of his agent and company.

https://www.youtube.com/watch?v=hR9qkhGQbyE

Yep, that's me at the end of the story.

 

[scagnt83]

Deflection and ignoring facts presented.... classic Robert Barney.

And a widow of a 70 year old who dies does not see the Term payments paid during ages 60+ as "wasted".

The facts are not fitting the argument so lets just change the argument.... classic Bob Barney.

BTW I am defending the term product that you have been trying to defend the whole time. But because my defense and facts presented conflicts with your ideals you are now creating a different argument.

 

[Robert Barney]

You should have read further into the report Bob. A lot of interesting data about what actually lapses and when.

It isn't the guy buying a $100,000 whole life that is causing the lapses, it is those FE sized policies that drive the lapses. Now, since they do look back about 20 years, a $5,000 policy was much larger then.

I didn't have to. Any term policy that doesn't pay a death benefit is going to lapse - PERIOD. Most renew to some stupid age like 95, as if anyone is going to be paying premiums for those products at age 90. It's patently absurd.

On the other hand, what should be alarming is the high rate of lapse on whole life policies, which are apparently sold to ensure people have life insurance when they die. If that's the objective, the high rate of failure should cause everyone to realize something is very wrong.

It's tantamount to the mortgage crisis, where people bought the house, then walked away from it and the mortgage.

Whole life insurance shouldn't have ANYTHING like the lapse rates it does, but it has those lapse rates because it gets sold to people who didn't need lifetime coverage, and eventually realized it.

Do the guys selling those policies to people who didn't need them care, not at all. They just cared about the compensation for having bagged another sale. A product sold to a person who needed it, doesn't lapse until it was supposed to. Once again, ALL term will eventually lapse.

----------

And a widow of a 70 year old who dies does not see the Term payments paid during ages 60+ as "wasted".

No, and the winners of lotteries never regret buying tickets. Do you advocate buying lottery tickets as a financial strategy?

The facts are not fitting the argument so lets just change the argument.... classic Bob Barney.

Really. I thought I read this somewhere:

The statistics show that consumers still need coverage after age 65. And they are waiting to secure coverage for retirement until they are the most expensive ages to buy life insurance.​

Did you miss it.

BTW I am defending the term product that you have been trying to defend the whole time. But because my defense and facts presented conflicts with your ideals you are now creating a different argument.

Feel free to explain to me why a 60 year old should be buying a 20 year term policy. Most who do that are buying them because they can't imagine that they are going to live past 80, and that the thing is a sure bet. One thing you can be sure of, if you bet against a life insurance company, you're likely to lose.

 

[scagnt83]

Again, explain why you think a 4% lapse rate is high.... most sane people consider that a low number.

To compare the sales of WL insurance to the mortgage crisis is just absurd and showing how ignorant you really are about life insurance.

And I could give you plenty of reasons why a 60 year old needs a life insurance policy. But the important thing is that the consumers see a need for continued coverage of life insurance.

If you actually sold insurance you would know how far off base your assumptions really are. A 60 year old does not buy term to try to "beat the insurance company". They buy term because they see a need to continue coverage. They are buying it because they think they are going to keep living, not because they think they will die.

I actually sell term and wl for a living. I actually talk to consumers on a daily basis an hear their reasoning for wanting to extend coverage. You have no clue what you are talking about when it comes to consumer mindset.

The free market says your assumptions are wrong Bob.

I dont expect to or care to change your mind. But for those of us who sell insurance for a living and actually specialize in life insurance; we know how wrong your assumptions are. We live in the real world... so do our clients.

 

[VolAgent]

Again, explain why you think a 4% lapse rate is high.... most sane people consider that a low number.

To compare the sales of WL insurance to the mortgage crisis is just absurd and showing how ignorant you really are about life insurance.

And I could give you plenty of reasons why a 60 year old needs a life insurance policy. But the important thing is that the consumers see a need for continued coverage of life insurance.

If you actually sold insurance you would know how far off base your assumptions really are. A 60 year old does not buy term to try to "beat the insurance company". They buy term because they see a need to continue coverage. They are buying it because they think they are going to keep living, not because they think they will die.

I actually sell term and wl for a living. I actually talk to consumers on a daily basis an hear their reasoning for wanting to extend coverage. You have no clue what you are talking about when it comes to consumer mindset.

The free market says your assumptions are wrong Bob.

I dont expect to or care to change your mind. But for those of us who sell insurance for a living and actually specialize in life insurance; we know how wrong your assumptions are. We live in the real world... so do our clients.

Did you notice how high the term lapse rate is and how it stays pretty level?

I'm not surprised by the high amount of WL lapses in the early years. That is when it is the most painful, you haven't seen the upside yet. But I am surprised at all the term lapses through the life of the policy.