Help Me Understand Actuarial Deductions?

[nbrz]

What is Actuarial Deduction? And why is it so much? Currently in the final stages of my Living Benefits....My Life Insurance policy is a $500K Term policy with Living Benefits. I suffered a stroke...Didn't help that I ended up doing 4 CT scan in January 2021 and another 1 in May (thought my stroke came back).

I was told that my Living Benefits payout will be around $250K but with an Actuarial Deduction of $133K, I will only be getting $117k. Why so much? That is a 53% loss of money? Where did that money go?

 

[nbrz]

Going to assume NO KNOWS what Actuarial Deduction is and why it exist and why they cost sooooooo much? I think its ridicules that it is more expensive than the claim I'm getting back. Living Benefits is s huge scam

 

[Tahoe Ray]

Going to assume NO KNOWS what Actuarial Deduction is and why it exist and why they cost sooooooo much? I think its ridicules that it is more expensive than the claim I'm getting back. Living Benefits is s huge scam

"Free" living benefits aren't worth as much if you're actuarily expected to keep living a relatively normal life expectancy (which apparently the carrier thinks you will).

Ones that you pay for (that increase the cost of your policy or are a separate policy altogether) typically provide much more by way of benefits in my experience.

 

[Markthebroker]

This chart is a simplified version that covers the basics.

 

[bill3173]

The critical illness rider takes the biggest hit, because it's paid in a lump sum. They basically "re-underwrite" your policy to determine your life expectancy, and the future premium they're losing due to the reduced face amount of your policy. You'll only be paying premiums on the $250K from here on out.

If you call the carrier, there should be someone there to explain it, and give you better detail. This is really a lot to talk about here.

 

[nbrz]

Thanks for the information. Just never thought the cost would be so high. I'm assuming this is standard business? Is it normally this costly? My agent never warn me about this huge expense if I ever need to make a claim. I have spoken with three other insurance agents and they too had no idea, never heard of it. And they all sell Living Benefits Life Insurance.

 

[Tahoe Ray]

Thanks for the information. Just never thought the cost would be so high. I'm assuming this is standard business? Is it normally this costly? My agent never warn me about this huge expense if I ever need to make a claim. I have spoken with three other insurance agents and they too had no idea, never heard of it. And they all sell Living Benefits Life Insurance.

Normal if your life expectancy is long. If your doctor gave you a few months to live, you would have got almost the whole 250k.

If those agents didn't know how the policy works that they're selling, that's a problem.

And again, you can buy policies that pay a lump sum based on major health events (where that lump sum is clearly defined) but that costs more money.

For most insurance products, the more likely it is to pay a claim, the more expensive it is.

 

[walthamny]

You could also see how much your policy would get on the free market from investors. It may be more than what you would receive exercising a living benefits rider. They will pay you cash in exchange for you turning your policy over. If you tell the carrier you are considering doing that they may reduce the actuarial charge to keep the policy from changing ownership. The insurance company makes more money if you remain the owner.

 

[nbrz]

Normal if your life expectancy is long. If your doctor gave you a few months to live, you would have got almost the whole 250k.

If I didn't have much time left to live, wouldn't I be getting the whole $500K instead of the $250K? Because my policy is $500K?

 

[nbrz]

You could also see how much your policy would get on the free market from investors. It may be more than what you would receive exercising a living benefits rider. They will pay you cash in exchange for you turning your policy over. If you tell the carrier you are considering doing that they may reduce the actuarial charge to keep the policy from changing ownership. The insurance company makes more money if you remain the owner.

I heard about that but thought that only works for permanent life insurance?