How appropriate that when I looked up the definition of guarantee I not only got what I expected, but it was a bit like opening a life insurance fortune cookie, “provide a formal assurance or promise, especially that certain conditions shall be fulfilled relating to a product, service, or transaction” as in”the con artist guarantees that the dirt pile will yield at least 20 ounces of gold”. To me it’s kind of like what’s done with your body after you die. For a small amount of money they can guarantee that you will be turned into a pile of ashes. For a lot more money they can put you in whatever kind of box you want, bury you 6 feet down and there is no guarantee after that. Either way you’re dead and it doesn’t matter, but if that’s the case why not spend less money and get a guaranteed result?
So, who got me going on guarantees in life insurance this time? Who breached the moral wall around your life insurance cash value and death benefit guarantee? No One, yet! I was looking through life insurance bulletins this morning and came across one from Genworth bemoaning the fact that they were once again going to have to lower their interest crediting rate on their life insurance products that are affected by it. In the middle of this bulletin they stated, “The new rates are not less than the guaranteed minimum crediting rates”. Doesn’t it seem kind of odd that if you have a guaranteed minimum, well, a guaranteed minimum anything, that if you change that number’s counterpart that there is no way that the new number could be less than the guaranteed minimum?
Looking at that from another direction, how would you feel about getting an inforce illustration for your cash value life insurance policy that shows an assumed interest rate column that looks worse than the guaranteed interest rate column. Exactly backwards of what they always are. For sure a reason to look twice and wonder, “so if they assume they are losing money by honoring their guarantee, how long will it be before the redefine guarantee”? After all, that is exactly what life insurance companies have been doing for the last 10 years. If something isn’t working out as well as they had hoped for their stockholders they simply redefine what they said in all of the policies and, boom shakalaka, all of your planning is down the crapper.
When we get our next update from Genworth is it going to say that, “The new rates are only slightly less than the guaranteed minimum crediting rates”? How long is it before the government slams the brakes on companies that sell indexed universal life and say, “Our economy is propped up by artificially low interest rates and we are calling an unsportsmanlike conduct penalty on you for using the last 30 years of unpropped up economy to project future earnings”. That would be 15 yards from the spot of the foul. 30 years and 15 yards. Makes sense to me. IUL advocates and agents get to run amuck making claims of wealth triply compounded doubly daily, knowing full well that they are full of it and the policy won’t really do that for their customers. Arghh!!
Bottom line. Is it possible to do worse than guaranteed life insurance minimums? With statements like Genworth’s above I wonder if the answer is really yes and with a simple redefinition of guaranteed they will gobble up your policy and poof!, just like that you beneficiary doesn’t have life insurance anymore. If you have questions or would like to have an independent review of your cash value life insurance, call or email me directly. My name is Ed Hinerman. Let’s talk.