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Is There Still Hope For Whole Life Plans?

Updated: Feb 7, 2023

I was unable to write the last few weeks because I was swamped with inquiries and policy optimization before these projected changes.

The last article generated quite a lot of buzz.

I didn't think it was fair to induce any kind of fear-mongering, which is why I only released it with enough time for people who felt a genuine need to look at their policies and act.

But realistically there were serious potential changes and I regret not releasing it earlier.

Despite my best efforts (an effort that nearly killed me) - there were still a couple of policies and a couple of people who couldn't get the old versions of these policies. But, you might ask - isn't it fear mongering as a consultant to rush people into a old version of a policy, despite insurance companies announcing that bonus rates would be reduced all around? (old policy or otherwise).

Well hopefully people can see at the very least it wasn't my intention...

But more importantly, its two other more important factors:

1) Price: More Expensive

I had some unpleasant words with a young consultant who blatantly put out on his Facebook that prices would surge exponentially after July.

After warning him of potential MAS/Compliance issues, we did have a civil discussion - and I felt that prices might actually be reduced since the bulk of RBC2 was already addressed by reducing future returns.

...I have no idea what came over me. I'm not usually so optimistic. Here's reality in a nutshell:

Price of Life Insurance After July

Price of Life Insurance Before July

I used a particular company that didn't happen to also change its rider prices just to illustrate the Death Benefits alone.

Frankly speaking, I was disappointed because this company was never the cheapest, but quite reliable in terms of benefits.

The majority of companies experienced a price surge - I ran through a couple of other companies to confirm this, though admittedly not all. Even so, like in standard insurance - there are trade offs for low cost, and hopefully everyone will still seek out a professional to help you work through the comparisons.

2) Guaranteed Benefits: Lower. Maybe much lower.

This was the one that really crushed my soul.

I ran the comparison for a $50,000 x 4 for a 25 year pay plan that I had done up previously. Let's look at the benefit differences:

Before July, Surrender Value

Before July, the same policy coverage would have a guaranteed surrender breakeven at Age 65.

How about the guaranteed surrender breakeven for the new policies?

Possibly never.

Seriously... -__-"

You guys have to keep in mind this is a direct and fair comparison where I looked across multiple companies.

Sure, I may have my choice of examples to use for this article, but I have no real incentive to highlight anything negative in any form shape or manner. Think about that a little - and then realize that these older and better policies will never be restored to you.

What Can I Do Instead?

1) Traditional ILPs

There could be a reasonable rise in Traditional ILPs following this decline.

Its not uncommon for someone with my skillset to structure an ILP favorably - to the point that I even gave a talk earlier this year to almost 200 advisors telling them to consider this. Its just frankly speaking, not worth the time and the money. The commission and bonuses would likely be higher than a whole life plan, but it requires significantly higher hours to meet my professional responsibilities - so unless you have clients that are really appreciative...

...Some of the most efficient insurance countries in the world didn't offer guaranteed policies, so it didn't really make a lot of sense that we could handle it so well up to this point anyway. I'll be following this article up with an article about Traditional ILPs (and incidentally perhaps another one on a 101 that's been driving me up the wall) because it's quite likely that the marketing for it will surge through the roof in the coming months.

The polarized community on Financial Forums who haven't looked at a new ILP in 5 years will likely be terrified by this prospect and have nothing good to say about it, but realistically there's actually a few structures which are pleasantly reassuring.

Still, there's always...

2) Buy Term Insurance, Invest the Difference

You have a couple of clowns releasing articles like this with no justification - I imagine a wonderful time explaining to MAS exactly HOW they figured MAS conspired to help insurance companies 'profit', but unfortunately my life isn't so kind where people without a license can't just say whatever they want.

Worse, the one part he did get correct technically is that there really might not be a better time to Buy Term Invest the Rest - mathematically, at at least.

I have no horse in this race - my client's average portfolio beat Stashaway's YTD return (and Temaseks, as I pleasantly found out this week) by over 55% in 2021 - but I have some serious fears based on the policies that I've had to deal with, which I discuss in my Closing Thoughts.


Closing Thoughts

I had a surprisingly drawn out public comment exchange with Tree of Prosperity about my last article, following which I received over a dozen private messages asking me to look at their existing coverage. Chris suggests that I warped the idea of BTIR for my own benefit, but for someone who spends as much time on the ground as he does [which I admire] he seems unusually oblivious to how susceptible people are towards suggestion online, which is what I spend years warning Seedly about before getting kicked off. I spent the last month correcting those exact portfolios, and deadlines were extremely tight [and having read the article up to this point, you can see why it was important for me to do my job], so that should tell you something about reality and professional responsibility vs idealism.

Some people were denied and will likely be stuck on expensive, inferior structures.

This is damage not caused by other agents (although I will have PLENTY to talk about that in another article upcoming because of some recent incidents) but from advice followed online, whether through bloggers or forums or other unlicensed folks.

I'd like to say its unusual how nobody talks about this, but it actually makes sense. Nobody talks about personal failures, but it's easier to blame someone else publicly.

Hopefully, you guys will still seek out professional advice before its too late.

Money Maverick

1 Comment

Nov 23, 2021

have you compared buy Whole life but shorten payment to 5 years and invest the rest of the cashflow? Rather than by term and invest the rest

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