Poor yield on life insurance policy

A policyholder paid premium for 21 years under a whole life policy and obtained a surrender value that represented a yield of less than 2%. The insurance had advertised an actual yield of more than 5% for other products of similar durations.

The policyholder was unhappy with the poor yield on his policy and asked for an explanation. He was told that it was due to the specific type of product, which provided high coverage. In my view, this should not account for the large difference in the yield.

It is likely that this policy was given a lower yield due to the restructuring of the bonus. As the bonus varies for each policy, it was difficult for the policyholder to know if he had been given a fair rate of return.