Nearing 100, Wisconsin woman finds the insurance money is gone

[This post has been updated]
Lorraine Guenther, 98, of Milwaukee, says she thought she had a deal with Minneapolis-based Thrivent Financial when a couple of insurance agents came to her Lutheran church when she was in her 60s.

“The men would come to church and talk to us and we knew them as friends. The man who prepared it for us was a friend of my husband’s,” she tells Jim Stingl, of the Milwaukee Journal Sentinel. “It’s your church that’s doing it so you do feel comfortable.”

So she’s paid her premiums, anticipating that when she dies, there’ll be enough money for her survivors to have her buried and sent off properly.

Now, she’s finding out, there’ll be no money. She outlived it.

Though the policy is supposed to “mature” when she turns 100, the company has told her its cash value has dwindled away to nothing and the death benefit will expire this year.

The agents are, no doubt, dead now. So is her husband, who bought the policy, so Thrivent put her in touch with a new agent.

“He said, ‘The Lord has been good to you and has allowed you to live all these years,’ ” she said.

“I’m very grateful. Thank you, mister,” she replied. “But I still expected to get my money when I passed away so I could be buried.”

She figures she’s put $20,000 into premium payments so far, although the numbers in Stingl’s column don’t quite add up because she says her premium was only $500 a year.

Thrivent wouldn’t talk to Stingl, he says.

I contacted Thrivent to see what’s going on here.They asked me to submit questions by email, which I did, ending with this one: Is this fixable, or just a cautionary tale?

A statement from Thrivent Thursday says a policy like Lorraine’s offers no guarantee of coverage until age 100. Notices are sent to customers to let them know how long their policy is expected to last, based on the premium, current interest rates, policy costs and the cash value. Low interest rates like we’ve seen in recent years may lead to higher premiums or earlier lapse dates.

“Members have a wide variety of life insurance products available to them. A life insurance contract for a 67-year-old female that guarantees coverage until the age of 100 would have a significantly higher premium, exceeding $1,200 a year, compared to a product with flexibility,” the statement says.

“In my words, they’re penalizing me for living,” Guenther said. “I hope nobody else takes out that policy because they’re going to have the same problem I’ve got right now. When they need it, it won’t be there.”

According to Thrivent, the policy was a universal life policy.

A universal life insurance policy provides policyholders with cash value and minimum interest rates that are guaranteed. Universal life insurance also allows flexible premium payments and uses the cash value of the policy to pay policy expenses. If interest rates were high at the time of purchase and then lower over time, universal life policy holders may have to pay higher premiums to offset lower interest returns or face earlier lapse dates as the cash value of the policy can no longer cover the costs of the policy. If interest rates rise during the time the policy is in force, premium amounts might be lower. Policy holders have an option to pay more toward their premiums if it appears lower interest rates will affect the lapse date of the policy.

Those who purchase this type of policy receive statements with updated information based on premiums paid, current interest rates, policy costs and the cash value of the policy. They also receive information regarding how long their policy is projected to last based on their insurance contract and its level of funding with their current premium payments. The purpose of these communications is to keep policyholders informed on a regular basis so they can take steps to protect their insurance coverage if the projected longevity does not meet their needs.

In a statement, Thrivent says Guenther was incorrect when she said she paid premiums every year.

Thrivent has record of the following ongoing communication with Ms. Guenther regarding her universal life insurance policy:

o In 1999, a Thrivent Financial representative had a detailed meeting with Ms. Guenther explaining how the universal life insurance contract operates, the status of her universal life insurance contract, and a review of her annual statements. In response, Ms. Guenther chose to make a premium payment adjustment to continue to fund the universal life policy rather than choosing different product options available to her at the time.

o In May 2011, Thrivent sent quotes to Ms. Guenther on alternative insurance programs to resolve the potential lapse issue prior to age 100. Despite receiving options that would have allowed her coverage to last longer, but she did not make any adjustments to her policy.

o Since 1999, annual statements to Ms. Guenther contained language indicating the projected longevity of the contract. For the past several year, the following language was included on the first page of her annual statement: “This contract is estimated to terminate without value at age [the specific age less than 100], which is prior to the contract’s Maturity Date. The estimate is based on the current cost of insurance charges, and any payment of planned premium or loan repayments. You may want to increase your premium payments to maintain your cash value and coverage. The billed premium amount will not be increased without your instruction.”

o Ms. Guenther has had numerous meetings with Thrivent Financial representatives over the years to discuss her insurance products, including product illustrations showing how long her contract was projected to last (using guaranteed and current interest rates.) These illustrations indicated the contract would not last to her age 100.

Further, Thrivent has been informed by the Wisconsin Office of the Commissioner of Insurance that they have closed a complaint file on this matter after reviewing Ms. Guenther’s contract and premium payments.

It is important for insurance policyholders to review their policy information on a regular basis to ensure they understand the benefits and risks of the policy. Annual statements provide updated information based on current interest rates and the insurance contract benefits, as well as anticipated contract longevity based upon current assumptions. Sharing policy information with loved ones and/or caretakers can also help minimize confusion about policy updates and benefits.

I used to sell policies like this when I was in the insurance business back around the time her husband bought this policy (I didn’t work for Thrivent).

Here’s what probably happened: Her husband was probably shown a chart that showed what the cash value would be over the life of the policy. Cash value is made up of a percentage of premiums paid and the dividends that the insurance company pays out.

Dividends were lot higher back then, so the chart probably included the fine print that it’s no guarantee of future results.

To keep premiums lower — and to get the sale — insurance agents would offer the option of using the policy’s cash value to keep the life insurance in force. This decreased the odds that a policyholder would later call and say, “my premiums are too high; the kids are grown. Let’s cash in this insurance policy.”

Encouraging policyholders to keep the policy is important because every year, the agent who sold the policy gets a commission on the policy annually, even years after he/she sold it. Theoretically, this also encourages the agents to keep providing service and communication to the policyholders.

And that works great for policyholders and agents, until the cash value — thanks to premium payments and declining dividends — dry up.

This policy dried up.

As savings plans, life insurance is a lousy tool, even though they’re often sold as forced savings. At their core, policies are a bet you make with an insurance company that you’ll get more money from them, than they get from you.

Insurance companies rarely lose that bet.

  • Erick

    My Thrivent (formerly Lutheran Brotherhood) agent will be hearing from me.

    • Guest

      GOOD. Most folks should have that conversation. What happens with this policy if I live to be 100?

  • MrE85

    Just as church and state should remain separate, so should church and business. All insurance is, by it’s nature, the work of Satan, regardless of who is selling the policy.

  • Guest

    Same with annuities. You get to choose what combination of payback & draw down you want and nope, unless you choose something else, payments end.

    “Notices are sent to customers to let them know how long their policy is expected to last, based on the premium, current interest rates, policy costs and the cash value.”

    And yes, you are penalized for living. That is the policy you picked.

    • Life insurance is nothing more than a bet you make with the insurance company that they’ll get more money from you than they’ll ever pay in return. Most of the time, the companies win.

      • Guest

        IF the insurance company didn’t win most of the time, there would be zero insurance companies. Kinda like objecting to house odds in Vegas and still expecting casinos to exist……or state lotteries.

  • Erik Petersen

    Thrivent is not the bad guy here. There is no bad guy here.

    • See additional info I provided.

      I used to sell policies just like this.

      The policy is being enforced as written. The method by which is people were sold insurance (I don’t know how they’re sold now) doesn’t quite cross the line, but, man, it comes awfully close.

      One of the best laws ever written is the one that gives you three days to cancel out of a contract. Those are the days when you need to really read what you’ve bought because I can almost guarantee that in matters of life insurance — especially when they’re pushed as forced savings plans — it’s not what you think.

      • In the last few years, I’ve cashed in every life insurance policy I had EXCEPT for the one my dad sold me — $5,000 — in 1964. That one has sentimental value.

        Once my kids were out of the house, and with retirement savings providing a far better ROI than insurance ever could, there was absolutely ZERO need for life insurance.

        To me, the only purpose it has is income protection while you’re working.

        In this woman’s case, there was another option I’ll bet she had that was part of the policy’s provisions. She could have converted that policy to paid-up insurance — usually for a smaller face value (depending on the year of the conversion) than the original policy. It would have NO cash value, but it would have a death benefit which would have likely remained in force and provided some dough for a funeral.

      • Erik Petersen

        Uh, yeah, the policy is being enforced as written and not as it wasn’t written. That makes Thrivent bad guys? That makes them close to ‘crossing a line’ into fraud?

        I didn’t sell insurance but I’ve been in the business. Policies almost always get demo’d to the client with an age table that shows no benefit pays after age 100, because after age 100 you are actuarial dead as far as it goes. This is not actually obscure knowledge to the general public.

        Living to 100 is an outlier. If you had to create rates based on the small group of people who lived > 100, it would raise rates. This is not a malevolent thing, its math.

        We buried an elder recently. It was a shock to me that funerals cost $15k. You absolutely need insurance to pay for that.

        • I didnt’ say anything about Thrivent being bad guys so that ‘s not anything I need to respond to, and my comment about “coming close to the line” is based on my observations and experiences while working with agents at the time. That’s why I used the past tense. What Thrivent’s (Lutheran Brotherhood’s) agents were like I don’t know. I’m giving you my observation based on working in the business at the time.

          Thrivent sounds like the agents are trained as I was which was “sell to your friends” (i.e. church members), which is pretty standard stuff. Most agents don’t last beyond the part where they sell to their friends.

          // Policies almost always get demo’d to the client with an age table that shows no benefit pays after age 100, because after age 100 you are actuarial dead as far as it goes. This is not actually obscure knowledge to the general public.

          This kind of proves my point, actually.

          Here’s what a table looks like. This comes from one of the “Big Three” life insurance companies. I suspect this was a “life paid up at 65” policy (I can’t recall whether I sold this one or I bought this one).

          You’ll note that the death penalty doesn’t have anything after 65. But this does not mean there is no death benefit at 65, It means at 65, the death benefit no longer changes.

          The only time the contract wouldn’t recognize benefits payable after 100 is if it actually SAYS that death benefits are not payable after 100. Most policies do not say that (or did not say that when I was selling them).

          I’m not sure what your insurance role is but the role of the actuarial is to calculate the liklihood of a person living to and beyond 100 and adjust rates accordingly. That’s why your term insurance goes up as you age. It’s part of the gig.

          Now, obviously an insurance company can refuse to pay after 100, but saying it’s math is irrelevant. You’re looking at a contract and math doesn’t matter in contract, words in the contract matter.

          Not that anyone actually reads those words, mind you, which is why people don’t really know what the heck they’re buying when they buy life insurance.

          Yes, you’re right, funerals are expensive and insurance is an effective way to pay for them but you have to realize you’re not using your insurance to pay for the funeral. YOU’RE paying for the funeral with the money you put into your insurance MINUS the amount it cost the insurance company to provide protection to you over the many years preceding your death in which you would have won the bet you made with the insurance company if you’d died at a young age.

          • Erik Petersen

            Well I think the narrative tone / implication of the story you pull from, and your accompanying post, is that this woman is getting screwed. If you don’t mean to imply she’s getting screwed, whats the hook here? Irony? Irony that she outlived her insurance? I can live with that, there is irony there, but its not an irony of injustice.

            Shes not getting screwed. She paid premiums and had coverage for time / amounts agreed on by the contract terms.

          • //If you don’t mean to imply she’s getting screwed, whats the hook here?

            OK, so now we’ve passed your assertion about contract terms indicating no benefits after 100 (incorrect) and we’re moving on — are we? — to what you THINK I meant as opposed to what I’ve said because surely what you THINK I’ve said must be what I meant to say? I see.

            I think it’s a really interesting story. I think Stingl writes interesting columns. I think insurance is a product that very few people understand and this is what happens in those situations. And I think unraveling the narrative is a good blog post.

            Maybe now people understand the value of — or lack of value — in their insurance and they’ll go look at their policies where I think they’ll find, as I’ve said — with words and everything — that what they think they’re getting isn’t what they’re getting,

          • Erik Petersen

            OK –

            I was sloppy where I quoted some details, that’s true.

          • Guest

            A heads-up article IS appreciated.

      • “One of the best laws ever written is the one that gives you three days to cancel out of a contract.”

        Is this true for any contract?

  • I told them to go to hell when they refused coverage in the event that I perish in a private plane accident. Since I intended to keep flying, I dumped their product.

    • Guest

      Thanks for that refusal. It just kept life insurance cheaper for the rest of us to NOT cover private pilots.

  • pjmasi

    I’m not quite understanding the actuarial math here. How could a $25k policy for a 67 year old only have a $500 premium? That seems way too low, unless I’m not getting how the insurance company views and manages this risk.

    • It was that low because the insurance company was withdrawing cash value from the policy to pay the premiums. That’s a provision that would’ve been in the original contract and what her husband agreed to. The chances are pretty good that she never was in charge of paying the bill on it so when he died, she just started paying what she thought was the annual premium. It wasn’t the annual premium. It was the premium after it had been reduced.

      That provision probably looked good at the time her husband bought it (and it might even lookgood now), but I GUARANTEE that the chart he was shown was based on dividend rates at the time (dividends are added to cash value), and the small print probably even noted that the projection was based on existing dividend rates at the time and there’s no guarantee.

      But you know what people see when you show them that chart about what the policy will be worth in various hypotheticals? The numbers.

      • pjmasi

        Got it, thanks. I also wasn’t factoring in the rising cost of insurance for a universal life policy vs a whole life policy. Those two things taken together explain what I was missing.

        • I’m still not even sure of the terms anymore. Whole life is what I always referred to as the “cadillac”….I thought that was also “ordinary life” and “universal life” but I might be wrong there. The company I used to work for had (in descending values) Whole Life, Econometric (combo of term and whole life), and Term. I think it’s asking a lot for mortals to understand 99% of insurance.

  • Christy Carruthers

    Thank you so much for writing and publishing this article! I have several Thrivent policies and yes, I have an en-force document but didn’t understand that it zeroes out at a very late date in one’s life. It’s called life insurance and the expectation is that you pay the premiums and then when you pass away, your heirs collect. There was no “expiration date” posted on my policy- I will definitely be calling my agent and getting down to the those “dirty details” that obviously I wasn’t told about-I don’t think I would have purchased those policies otherwise. Who in their right mind would?? There seems to be a lack of disclosure and yes, when you buy from your church’s affiliate, you don’t expect to pay all those years to have your policy basically become worthless.