re: Whole Life Insurance Lapse Rate

I believe you are wrong. The reason for that is the number 4% is an average from the relapse rate of all policy bought at a specific year.

Example

Year zero = 100 policies

Year one has about 12% drop

Year two is about 10%

Year three is about 8%

All thru the years til the drop percentage levels at 2.5% per year

Take all those years, average it, you get 4% per year.

So,

Y0 = 100

Y1 = 100 * 0.12

Y2 = (100*0.12)* 0.10

Y3 = ((100*0.12)*0.10)*0.08

And so on, til about 80 policies have dropped