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Started By
Message
re: Whole Life Insurance Lapse Rate
Posted on 1/26/14 at 4:28 pm to Stingray
Posted on 1/26/14 at 4:28 pm to Stingray
Okay, you can blame bad selling, that is definitely a factor. However, tying the lapse ratio to actual return is dishonest at best.
However, I'll humor it. What does the lapse ratio have to do with WL being a bad product? If you purchased it, are you going to lapse it? If not, ten this whole conversation is worthless.
Term lapse rates are worse than WL. I would venture to bet the % of people who actually inves the difference in premiums is even worse. Does any of that change your return if you choose that strategy? No.
However, I'll humor it. What does the lapse ratio have to do with WL being a bad product? If you purchased it, are you going to lapse it? If not, ten this whole conversation is worthless.
Term lapse rates are worse than WL. I would venture to bet the % of people who actually inves the difference in premiums is even worse. Does any of that change your return if you choose that strategy? No.
1
Posted on 1/26/14 at 5:20 pm to Stingray
There is nothing rotten about it. Well some companies are. You're trying to tie in a return on the cash value in a whole life policy to the lapse ratio. It's apples and oranges. 80% of policies do not lapse unless your formula is real life, which it isn't. You'll also note in that report, lapses were very high the first years then leveled after that. A lot of that has to do with the upfront costs and people being impatient for the long run, or being sold incorrectly.
Like GoCrazyAuburn said. If you don't intend to lapse the policy then your argument is not valid.
Like GoCrazyAuburn said. If you don't intend to lapse the policy then your argument is not valid.
This post was edited on 1/26/14 at 5:25 pm
Posted on 1/26/14 at 5:28 pm to RebelOP
What your really need to be looking at is the profitability to POLICY HOLDERS vs stock holders and the M&E (mortality and expense charges) along with the lapse ratio. The lower the M&E and expenses and a great financial strength rating by all the rating agencies. You'll be fine.
Posted on 1/26/14 at 5:49 pm to RebelOP
quote:
Like GoCrazyAuburn said. If you don't intend to lapse the policy then your argument is not valid.
Well, this is an obvious logical fallacy.
Do you think the 80% initially INTENDED to lapse the policy?
They intended to leave tons of money on the table? Nah.
So all that matters is my initial intention?
Posted on 1/26/14 at 5:54 pm to GoCrazyAuburn
quote:
However, I'll humor it. What does the lapse ratio have to do with WL being a bad product? If you purchased it, are you going to lapse it? If not, ten this whole conversation is worthless.
A metaphor.
If I step up to bat, I can intend to get a hit. Maybe I will, maybe I won't. But history says that even the greatest of hitters only hit around .300. This information bodes poorly on my chances to get a hit - just like 80% bodes poorly on my chances to get to the death benefit.
This post was edited on 1/26/14 at 5:56 pm
Posted on 1/26/14 at 6:20 pm to Stingray
There is no 80%. Stop using your formula because it is wrong.
Posted on 1/26/14 at 6:30 pm to Stingray
Look man, you are obviously trying to find a reason to not get whole life. That is fine. There are plenty of reasons for that.
However, the issue you are trying to make isn't really there. Te lapse ratio has no bearing on your ability to receive the death benefit.
By your logic, buying term and investing the difference is a worse idea because more people never receive the death benefit.
However, the issue you are trying to make isn't really there. Te lapse ratio has no bearing on your ability to receive the death benefit.
By your logic, buying term and investing the difference is a worse idea because more people never receive the death benefit.
This post was edited on 1/26/14 at 6:35 pm
Posted on 1/26/14 at 6:37 pm to RebelOP
quote:
There is no 80%. Stop using your formula because it is wrong.
You have given me no reason not to believe the study.
Posted on 1/26/14 at 6:43 pm to GoCrazyAuburn
quote:
GoCrazyAuburn
quote:
Look man, you are obviously trying to find a reason to not get whole life. That is fine. There are plenty of reasons for that.
I don't think you can help me. Thanks for your attempt, though.
Maybe someone with a very good understanding of statistics can look at the link I provided, page 19, and verify my 80% conclusion.
Posted on 1/26/14 at 6:50 pm to Stingray
I'm not trying to disprove or verify the 80%, I don't really care either way.
What does it matter? You've yet to be able to show how that changes your individual ability to get the death benefit when you die. Your analysis doesn't match up. You have yet to explain how this makes whole life a bad thing. You are trying to use a statistic to explain great differences in individual circumstances.
Again, by your logic, nobody should ever buy life insurance. Am I mistaken?
What does it matter? You've yet to be able to show how that changes your individual ability to get the death benefit when you die. Your analysis doesn't match up. You have yet to explain how this makes whole life a bad thing. You are trying to use a statistic to explain great differences in individual circumstances.
Again, by your logic, nobody should ever buy life insurance. Am I mistaken?
This post was edited on 1/26/14 at 6:52 pm
Posted on 1/26/14 at 6:56 pm to GoCrazyAuburn
WTF, Is going on here? What does lapse ratios have to do with return? I will admit I did not read all of this thread only the last few posts.
Posted on 1/26/14 at 7:09 pm to GoCrazyAuburn
quote:
Again, by your logic, nobody should ever buy life insurance. Am I mistaken?
No. Term life is bought to protect you incase you die. you go into the contract knowing you are buying a period of protection, and there is no pay out if you out live it.
Whole Life is sold as an investment. The death benefit is expected to happen; if it wasn't, no way would people buy the hugely more expensive Whole Life compared to Term Life.
Readers, I am interested in a person with good knowledge of statistics to look at the numbers and graph in the link I provided to see if I am right about 80% of policy holders never seeing the death benefit.
I am not interested in your opinion on whether relapse rates should affect my thinking about my projected returns. I know relapse rates are relevant. They speak on my chance to see a death benefit.
Posted on 1/26/14 at 7:10 pm to Janky
That is what I am trying to figure out. He is mixing return, with receding DB.
From what I can gather, his question/argument is that WL is bad because a lot of people end up getting rid of the policy before they die.
From what I can gather, his question/argument is that WL is bad because a lot of people end up getting rid of the policy before they die.
Posted on 1/26/14 at 7:15 pm to GoCrazyAuburn
quote:
From what I can gather, his question/argument is that WL is bad because a lot of people end up getting rid of the policy before they die.
Yes, exactly. When looking at how expensive the premiums are, it is a terrible investment if you dont get the DB.
Posted on 1/26/14 at 7:26 pm to GoCrazyAuburn
Posted on 1/26/14 at 7:34 pm to Stingray
It's not about analyzing the statistics that's why there are those ratios because they already have the numbers/statistics to back up the ratio. You need to understand what the ratios mean. You're also looking at 2003, 04 numbers. That's over ten years ago now. And no where does it even backup your 80% number.
The reason why people are staying away from this thread is because you can't seem to get through your head....Lapse ratio and rate of return don't have anything to do with each other.
Whole life is not sold as an investment because that would be illegal.
The reason why people are staying away from this thread is because you can't seem to get through your head....Lapse ratio and rate of return don't have anything to do with each other.
Whole life is not sold as an investment because that would be illegal.
This post was edited on 1/26/14 at 7:36 pm
Posted on 1/26/14 at 7:37 pm to RebelOP
So, what % of WL policies pay out?
Posted on 1/26/14 at 7:37 pm to Stingray
quote:
No. Term life is bought to protect you incase you die. you go into the contract knowing you are buying a period of protection, and there is no pay out if you out live it.
Then, it isn't good protection as it has a higher lapse rate than WL. Therefore, by your logic, it shouldn't be bought.
quote:
Whole Life is sold as an investment. The death benefit is expected to happen; if it wasn't, no way would people buy the hugely more expensive Whole Life compared to Term Life.
1. Selling it as an investment is illegal.
2. You are assuming the death benefit is the "investment" part of the WL. This is not true. That is the cash value.
quote:
They speak on my chance to see a death benefit.
Your chance of seeing a death benefit is unchanged unless the reason for the lapse is universal throughout, and involves a problem that everyone has regardless of situation.
This post was edited on 1/26/14 at 7:42 pm
Posted on 1/26/14 at 7:39 pm to Janky
100% if kept.
Posted on 1/26/14 at 7:40 pm to Stingray
quote:
When looking at how expensive the premiums are, it is a terrible investment if you dont get the DB.
But you would be paying the same regardless, in the grand scheme, no?
Over the next 30-40 years, what would be a good return for you after tax?
This post was edited on 1/26/14 at 7:43 pm
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