For an explanation, see Decision Making Under Uncertainty: A (Second) Wakeup Call for the Financial Planning Profession.
Required breakeven rate of return for buying term and converting to a cash value policy later vs. buying a cash value policy now
|Date prepared||Company/ Product name/ Product type/ Type of term-a)||Age/ Gender/ Smoking status-b)||Face amount/ Premium pattern-c)||Illustrated interest rate-d)||Breakeven analysis|
|Breakeven criterion-e)||Waiting period-f)||Breakeven interest rate-g)|
|11/01||Northwestern Mutual/ Estate CompLife/ WL/ART||50/ Male/ Nonsmoker||$500,000/ Pay for life||7.00%||Death benefit at age 100||3 years||4.1%|
|12/02||Ameritas/ Low-Load VUL/ VUL/10-||57/ Female/ Nonsmoker||$1 million/ Pay for life||7.00%||Death benefit at age 100||3 years||-1.3%|
|12/02||Ameritas/ Low-Load VUL/ VUL/10-year term||57/ Female/ Nonsmoker||$250,000/ 6-pay||7.00%||Death benefit||2 years||3.7%|
If you have an actual case to contribute to this list, copy these questions to your e-mail program, provide the answers, and send them to firstname.lastname@example.org
- When were the sales illustrations prepared? (Month/year)
- What is the name of the insurance company?
- What is the product name of the cash value policy?
- What type of cash value policy is it?
- What type of term policy did you use for comparison?
- What is the insured's age, gender, and smoking status?
- What is the face amount of the policy?
- What is the premium pattern?
- What is the illustrated interest rate?
- What breakeven criterion did you use?
- What is the waiting period to convert?
- What is the breakeven rate of return?