Cash Value Increased Less Than Premium

[deanbrew]

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.

 

[WinoBlues]

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 would wait for the agent's rely before guessing. Could have something to do with a change in the dividend scale or options. Request a couple inforce illustrations if your agent has not done so already. You want one based on current values and one based on no further premiums. A ten year old Whole Life policy can have values beyond the cash values.

Now may be a good time to review your goals. They may have changed since you took out the policy. Which is more important cash values, death benefit or maybe paid up insurance?

Edit: also request the non forfeiture values.

 

[LGilmore]

Did you make any changes to the plan, premium wise or withdrawls or loans? Have you received an annual statement where the company will tell you what's going on? How about visiting their website.

You haven't been singled out, if they lowered their dividend it will be across the board in most cases.

Have to ask, if they paid more than though earlier, why didn't you leave? Dividends are a result of deaths in a given year, expenses in a given year and investment returns in a given year. Visit the company website and you should easily find your answer. If it's something, a large write off for the year, do you see it happening again?

At least this way if you decide to dump and run, you won't be kicking yourself later for jumping ship for a blip that amounted to one year underperformance.

I mean did you sell all your stock in 2008? stuff happens, see if it's a one time thing or a pattern. You don't need an agent to visit their website and find out. But make an informed decision.

 

[deanbrew]

Did you make any changes to the plan, premium wise or withdrawls or loans?

No.

Have you received an annual statement where the company will tell you what's going on?

No. I just received my Annual Report, which indicates the current death benefit, cash value and other figures, which brought about my questions.

How about visiting their website.... Visit the company website and you should easily find your answer. If it's something, a large write off for the year, do you see it happening again?

The website says nothing about dividends, and the most recent financial statement on the website is as of the end of 2013, so it doesn't address what has happened over the past year.

Have to ask, if they paid more than though earlier, why didn't you leave?

I don't understand the question. Can you rephrase?

At least this way if you decide to dump and run, you won't be kicking yourself later for jumping ship for a blip that amounted to one year underperformance.

That's what I'm trying to figure out. Thank you for the reply.

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From more digging on the internet, I found this blog entry:

"theinsuranceproblog.com/whole-life-insurance-investment-yield-trend-2014-edition"

In it, I see Lafayette Life at the bottom of the comparison table. Is this cause for concern?

To sum up my thought process, I have plenty of life insurance (death benefit) to serve my needs, regardless of whether I keep paying premiums or not. But I've been looking at the cash value increasing by more than my premiums as part of the non-equity, low-risk portion of my portfolio, offering diversification and safety. Perhaps my reasoning is faulty, or there is more to consider, and I appreciate any input.

 

[pfg1]

Some great points made above.

I wouldn't be overly concerned... though I'd be interested in hearing what the agent says. If you are 10yrs in...kudos to you. You've done what the masses won't, and it will pay off for you long term. Stay the course, you are over the hump.

Just keep in mind, these types of policies get better and better as time goes on. 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.

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.

Re: your question about Lafayette yields being at the bottom of the list, again...not a huge concern. Pretty much all yields across the board have been down due to the environment we are in, and that is a very small number anyhow. Maybe Brandon (a member here) will chime in on that, that is his blog.

 

[munson]

Lafayette Life is a solid firm and they are part of the Western & Southern Group. Dividends are not guaranteed. They can be less than the projected amounts from your original illustration from when you bought the policy. Whole life is the best type of policy to have and every agent here would say they wished they bought one when they were in their twenties. You no longer have a surrender charge after 10 years. You can change the dividend option to reduce premiums. That is your choice. The bottom line is if you subtract the cash value from the premiums paid, it is very likely that the total is less than what you would have paid for term insurance for the same 10 years...but you now have a policy for life if you want it. No honest agent would recommend you give up that policy. 26 years of experience.

 

[DWPCL]

Lafayette Life is a solid firm and they are part of the Western & Southern Group. Dividends are not guaranteed. They can be less than the projected amounts from your original illustration from when you bought the policy. Whole life is the best type of policy to have and every agent here would say they wished they bought one when they were in their twenties. You no longer have a surrender charge after 10 years. You can change the dividend option to reduce premiums. That is your choice. The bottom line is if you subtract the cash value from the premiums paid, it is very likely that the total is less than what you would have paid for term insurance for the same 10 years...but you now have a policy for life if you want it. No honest agent would recommend you give up that policy. 26 years of experience.

26 years of experience and you think his contract has surrender charges?

 

[WinoBlues]

26 years of experience and you think his contract has surrender charges?

One of those Whole Univesal Life things.

 

[munson]

26 years of experience and you think his contract has surrender charges?

Put your glasses on. He said he has the policy for 10 years. I said HE DOES NOT HAVE A SURRENDER CHARGE. After 10 years, the cash value will equal the surrender value.

 

[LGilmore]

Deanbrew,


Thanks for responding. 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.