Cash Value Life Insurance - Confusing

  • Gary Sanders (National Association of Insurance and Financial Advisors—NAIFA) agreed that use of the term “cash value” was confusing.

2017 0217 - NAIC - LIBG WG Conference Call

  • (p66) - Statement James Collins (R-TX) - Much misunderstanding of cash value life insurance has been caused when people have overlooked the true function of cash value in the life insurance policy and have insisted on comparing it to "investments" and "savings", whereas in fact cash values is primarily an incident of the reserve required by law to support the promise to pay at a later time, having its origin in the excess premiums charged in the early years of the contract to keep the premium level over the life of the policy.

1978 12 - GOV (House - Report) - Life Insurance Marketing and Cost Disclosure Report Together with Dissenting Views, John Moss (D-CA)  ---  [BonkNote]

  • Traditional plans are fairly simple in their structure.
    • One can look at their premiums, their cash values and their dividends, if there happen to be any. 
  • Universal life presents something of a paradox. 

--  Ben H. Mitchell, [Bonk: a consulting actuary with Tillinghast in Atlanta - Years-?]

1981 - SOA - Universal Life (RSA81V7N412), Moderator: Samuel H. Turner, Society of Actuaries - 16p 

  • One would be, for example, term life insurance, I think you could totally deregulate...people understand term life insurance and so on.
  • You get into some of the cash value products, people are very confused.
  • They need help. --  They need information. --  It is a very difficult product.

--  J. Robert Hunter, Director of Insurance, Consumer Federation of America

2004 0331 - GOV (House) - Working with State Regulators to Increase Insurance Choices for Consumers - (PDF-205p,

  • There should be suitability rules in place, particularly for cash value life insurance policies to assure that sales of proper products are made.  (p14)

-- J. Robert Hunter

2003 0506 - GOV (House) - Increasing the Effectiveness of State Consumer Protection - [PDF-123p

  • The lack of understanding of cash value products was evidenced by the fact that the majority of people could not understand why, in Chart A, if you continue to pay your premium, the benefit would run out before age 95...  (p467)

1990-1A, NAIC Proceedings - NAIC / LIMRA - Universal Life Disclosure Form Focus Group Summary  ---   [BonkNote]  ---  10p

  • Unlike a term policy, which can end after a specified number of years, permanent life insurance will continue to the policy’s maturity age so long as premiums are paid.

(Note that this isn’t exactly accurate for UL, where policies can continue as long as the cash value is sufficient to pay the policy charges. We may want to make that distinction.) 

2017 1115 - ACLI Letter, NAIC LIBGWG - 12p

  • A great deal of the confusion seems to stem from a lack of understanding of how cash value insurance products work and a lack of understanding of insurance terminology.
  • Also, because most people presume that if you pay your premium continuously, your policy will remain in effect, quite a few people had a hard time understanding how or why the policy would terminate in policy year 31.
    • This was simply foreign to their way of thinking.
  • One person was so confused that he said that the maturity age and endowment benefit were moot points, since the policy was going to end at year 31 anyway.

1990-1A, NAIC Proceedings - NAIC / LIMRA - Universal Life Disclosure Form Focus Group Summary  ---   [BonkNote]  ---  10p

  • Why can’t I compare cash value products and have some sense of what is going on in the marketplace?
  • Because the notion—I mean, it really is a problem, and it is a problem that is underaddressed because everyone is so focused on solvency that they forget all these other important regulatory issues. (p26)

--  Daniel Schwarcz, Associate Professor, University of Minnesota Law Schoo

2011 0914 - GOV (Senate-Banking/SII) - Emerging Issues in Insurance Regulation, Jack Reed (D-RI)  ---  [BonkNote]