Cash value boosted by non-guaranteed terminal bonus

Dear Mr. Tan
I am offered a whole life policy with premium of $2,053 payable for 15 years. At the end of 40 years, I get a cash value of $114,000. It represents a reduction of 33% from the accumulated premium of $171,000 (based on 5.25% yield). Is this a good deal?

REPLY
The reduction of 33% appears to be reasonable. I have seen another policy, where the reduction is 46%.

However, I am not sure if you can rely on cash value of $114,000. Some insurance companies show high terminal bonus at the longer duration to make the cash value look attractive. They know that most people do not keep their policies so long. If they terminate the policy earlier, they get a poor return.

Even if the policyholder keep the policy for 40 years, they may find that the insurance company can reduce the cash value, as the terminal bonus is not guaranteed.