Whole Life vs. EIUL: Which is the best wealth building tool?

By Roccy Defrancesco

The Wealth Preservation Institute


National Underwriter does a study each year where it compares the illustrated returns in WL policies vs. the actual returns. It's my favorite article put out by another entity. It's hilarious, because, going back 20 years, the illustrated internal rate of return (IRR) on WL policies is typically 2 percent more than the actual IRR.

I have multiple calls each month with what I call whole lifers (WLers). What are WLers? Advisors who have the following characteristics:
    1) They use WL as their primary wealth building tool for clients

    2) They know nothing or very little about EIUL

    3) They have the uniformed opinion that EIUL is a new type of policy without a track record.

    4) They don't know what variable loans are or how beneficial they can be.

    5) They don't know about the living benefits offered by EIUL policies, such as a free LTC benefit.
Why do these agents typically use WL, rather than EIUL?

Because they don't know any better. Why? Because some are lazy (they don't want to do research), or too trusting (trusting a company, sales system or IMO/GA that WL is the best/only way to build wealth with cash value life (CVL) insurance).

Offering the best options to clients

I don't care what type of policy a client buys as a wealth building tool. What gets me upset is when agents blindly sell clients the same policy (WL or EIUL). I believe clients should be offered both WL and EIUL when discussing life insurance as a wealth building tool.

The numbers

But enough pontificating, let's get to the historical internal rate of return (IRR) of various WL policies using a 20-year look back:

Illustrated IRRActual IRRDifference
Guardian Life6.57%2.97%-3.6%
New York Life7.01%3.72%-3.29%
Mass Mutual6.10%3.27%-2.83%
Northwestern Mutual Life5.92%4.65%-1.27%


The above numbers are staggering in what is supposed to be a conservative wealth building life policy.

IRR is not the greatest measuring stick, because it simply measures cash accumulation. As you know, the power in using CVL insurance is in the ability to borrow money tax-free from the policy in retirement. This is where WL really gets destroyed by.

WL vs. EIUL for tax-free dollars in retirement

I will use the moderately conservative Retirement Life(TM) (an EIUL policy) for this comparison. Assume our example client is 40 years old, pays a $10,000 premium each year for 25 years, and then max borrows from the policy from ages 65-84 (20-years).

Tax-free borrowing each year for 20-years

Ohio National $39,272
Guardian life$35,003
Northwestern Mutual Life$29,700
John Hancock $14,032


(Why National Underwriter didn't publish numbers on Mass Mutual or New York Life, I don't know).

How much tax free income could be removed from Retirement Life(TM) over the same time period using the back tested rate of return of 8.79 percent? An incredible $90,125.

If I lowered the assumed rate of return in the Retirement Life(TM) policy down to 7 percent over the life of the policy to make it a more conservative, forward-looking example, you'd think the numbers would be terrible right? Wrong. The conservative number is $49,926.

Wake up call?

If you think I get some weird satisfaction from writing this article, you are correct. That said, this is not about whether EIUL or WL is the best cash accumulation or tax free retirement wealth building tool.

The point of this article is to remind advisors that they should be offering their clients all the viable options when discussing CVL insurance as a wealth building tool. Clients deserve this so they can make an informed decision about which policy to.

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