When discussing the expenses within a life insurance policy it’s critical that you use language and visuals that help put the expenses in their long-term context. In column #7 in this illustration, Hartford Life lists the expenses as a percentage of the account value. As you can see, in the first year, the expenses represent 21.56% of the contribution. When clients see this on the illustration, it almost always gives them pause. However, the expenses by the 10th year have gone down while the account value has gone up. Expenses now represent a little over 1% of the account value. That’s better than most mutual funds! By the 25th year, the expenses are less than one-tenth of one percent. Had the clients despaired after the first year, they wouldn’t have been around long enough to enjoy the benefits of tax-free growth on, in this case, $1.4 Million of cash value. Life Insurance is a long term proposition and its critical that our clients understand its expenses within that context.
