Q: Should A Life Insurance Policy Be Split? – SIV/CIV
- Let us look at the question of splitting a life policy into its term and savings elements as an example of injecting the consumer's viewpoint into the current "great debate."
- Let us assume that a customer wishes to buy insurance protection for a ten-year period and wants to pay level annual premiums.
- He can purchase a ten-year term policy or a ten-year endowment policy.
- From a consumer's viewpoint the savings element in the ten-year endowment policy is obviously the difference in premiums between the two contracts.
- If a customer wants thirty years of protection, and wants to pay level annual premiums, then he might choose between two policies: a thirty-year term with minimum cash values and a thirty-year endowment policy.
- ⇒ Despite the fact that there are cash values in the thirty-year term contract, from a consumer's viewpoint it has no savings element.
- All of the premium is required to provide the thirty years of protection.
- The savings element in the thirty-year endowment is the difference in the premiums of the two contracts.
-- Paul Overberg
1973 - SOA - Price Disclosure and Cost Comparison, Society of Actuaries - 186p
- High early cash value policies, "premium endowments," and other policies which overemphasize the cash-value buildup have been around for years.
- Recently, however, some state insurance departments have been taking a closer look at these policies.
- At least one state has gone so far as to require separation of the insurance and savings elements in some newly filed forms.
- This involves requiring that a "premium endowment" be identified as "term insurance with a pure endowment" in the policy form and that the gross premium be so subdivided on the face of the policy.
- Another state is considering making this a requirement for all cash-value products, including whole life.
-- Robert H. Dreyer
1972 - SOA - Transactions, Society of Actuaries - 360p
- (p34) - John H. Filer, Chairman of the Board, AETNA Life & Casualty:
- Whole life insurance is not partially insurance and partially savings.
- It is wholly insurance.
- It is not designed to provide for the possibility of economic gain in return for a risked sum of money.
- That's an investment.
- Nor is it designed to accumulate deposits of money building toward an individual or family goal as the depositor remains alive to make the deposits.
- That's a savings account.
- It is designed to provide a guaranteed benefit at death, whenever death ocours, in return for a price which is expressed as a fixed periodic premium.
- That is what it is, that is what it does.
- Whole life insurance is not partially insurance and partially savings.
- (p131) - 1980 0130 - ACLI - AMERICAN COUNCIL OF LIFE INSURANCE
- DEAR SENATOR CANNON: Enclosed is a copy of the response of the American Council of Life Insurance to the comments by the Federal Trade Commission on the Council's testimony on the Commission's life insurance cost disclosure report which was issued on July 10, 1979. Sincerely, Robert Bland Smith, Jr.
- The staff of the Federal Trade Commission has chosen to respond to eight of the criticisms of the staff report made by representatives of the life insurance business at the October 17, 1979 hearing of the Senate Committee on Commerce, Science and Transportation. These responses merely repeat the erroneous ideas and conclusions that were set out at length in the FTC staff report.
- We should like to offer a few comments pointing out what we see as flaws in the responses of the FTC staff in order to clarify some of the matters under dispute. Our comments will follow the same sequence used by the FTC staff.
- l. The FTC staff report "adopts the flawed theory that whole life insurance is a hybrid combination of term insurance and a savings account."
- Instead, "whole life is not partially insurance and partially savings. It is wholly insurance."
- l. The FTC staff report "adopts the flawed theory that whole life insurance is a hybrid combination of term insurance and a savings account."
- DEAR SENATOR CANNON: Enclosed is a copy of the response of the American Council of Life Insurance to the comments by the Federal Trade Commission on the Council's testimony on the Commission's life insurance cost disclosure report which was issued on July 10, 1979. Sincerely, Robert Bland Smith, Jr.
1979 0710 and 1017 - GOV (Senate) - FTC Study of Life Insurance Cost Disclosure, Howard Cannon (D-NV) --- [BonkNote]
1979 07 - FTC - Report - Life Insurance Cost Disclosure, Federal Trade Commission --- [BonkNote] --- [PDF-460p]