Lapse Supported Pricing

[Deepsea]

I am saying that statistically you are being charged the most for the least in the beginning of the contract. Hence the contract is front loaded.

Obviously if you knew you would die in the first couple of years you would buy term. That would your greatest return on money invested. But of course if you are not old and are healthy----(the insurance company underwrites you)....the chances of you dying in those first few years or even 20 or 30 years if you are young enough are small.

However every year the chances of you dying get greater every year and it is a certainty that you will one day die. That is why the older and older you get the contract looks better and better if you keep it.

Only way to guarantee that you will collect on a whole life contract is to keep it Inforce during your entire life.

Heck...if you knew the lotto numbers to the mega millions....for just a buck you could collect 50,000,000-----and that is a really really good return

 

[scagnt83]

I am saying that statistically you are being charged the most for the least in the beginning of the contract. Hence the contract is front loaded.

........

However every year the chances of you dying get greater every year and it is a certainty that you will one day die. That is why the older and older you get the contract looks better and better if you keep it.

.........

Only way to guarantee that you will collect on a whole life contract is to keep it Inforce during your entire life.

If it is a level premium then you are being charged the same no matter what year the contract is in.
How they calculate that premium (COI/Admin/etc), really doesnt matter to the consumer. They pay the same dollar figure the 1st year as they do the 30th year.

And it is the least benefit from a life expectancy point of view. But it is the greatest benefit from a Rate of Return point of view. If you die in the first 10 years the carrier is in the red on your contract.


But I do understand your point that as you age and get closer to life expectancy the chances of using that policy increase, which makes it more valuable to that person. That is why lapse rates are much lower in later years vs. early years.



And the last statement depends on your definition of collect. Many people use the CV of the policy which greatly exceeds the Premiums they paid. No, the CV never goes above the DB... but that is regulated by law... and on a UL in a persons 80s and 90s the CV can be within 95% of the DB.