Let's be clear what a blended WL policy actually is. If someone needs $1M of coverage, it is relatively expensive to buy that amount of WL, so you can cut the cost down by buying 3 insurance products at once:
1) Whole life sleeve - the core is a small piece of WL. How small will depend on many factors, and it could be 100K, or it could be 400k, etc
2) Paid up additions sleeve - single premium whole life. The premium cost is much higher than it would be for the same amount of whole life death benefit, but the cash value and dividend eligibility is also higher
3) Term sleeve - annual renewable term insurance. The premium is much cheaper than it would be for the same amount of whole life death benefit. But it might be much more than you would pay for a standalone level term policy. No dividends and no cash value.
The goal is for 1 + 2 + 3 to equal the desired $1M death benefit. It's mostly term, but every time you buy paid up additions it replaces a small amount of term, and every time you get a dividend it could also be used to displace a small amount of term. The hope/promise is that over many years the term portion will be completely bought out. Many years.
Personally, I'd rather buy a small WL policy and a standalone term policy. More cost effective and easier to understand. But this blended structure is good for maximizing cash value growth- so once again, it comes down to a question of goals - optimize cost of coverage or savings?
Never heard of the components referred to as sleeves, but I guess that might be actuary talk...
As for the costs, I pointed to this before, and I think this should be stressed again. I think anyone that will see how Paid-Up-Additions work will agree that they are not a high cost product, but actually (at least in the short term, and for younger people) one of the lowest cost insurance products out there. If the entire cost is the lost-opportunity cost of 5%-10% of the premium which is fully recovered in 2-4 years, how is that costly?
As for the ART part of the blend being costlier than a level term policy, that is mostly true if talking about a short-term level term, but in comparison to a long-term level term, the ART component of a blended policy will often be cheaper in the first 5-15 years. I have used blended policies for my children, front loading them with Paid-Up-Additions so that by the time they get married they have more than 100k of FULLY PAID UP life insurance coverage (with growing cash value in excess of premiums paid).
A real-life example I just looked at today, was a client of mine who bought a blended 100k+400k policy 11 years ago and called me to drop the term portion. Dropping the term would leave the client with a death benefit of about 108k (and the rating would be lowered, as this specific policy has a minimum death benefit of 250k for best rating). I suggested lowering the term portion to 150k, and informed the client that if they would dump-in 39k, that term would be fully bought out (the client would pay a 5% sales charge on the 39k, but in 2 years that would be fully recovered by the cash value growth and dividends). So in this example (female in mid 40s), one payment of 39k buys a lifetime of 150k (and growing with dividends), where the
ONE TIME cost is 1.95k which is
FULLY RECOUPED in 2 years. Year over year cash value growth is slightly north of 4%.
