Why Whole Life Insurance?
The grandfather of life insurance products, whole life insurance, is touted as THE answer to your life insurance needs by some, and exactly the opposite by others. So, what’s the truth? Let us help explain whole life insurance.
What It Was!
In it’s original and simplest form whole life insurance was a policy that that had a level death benefit to age 100 and a cash value fund that grew at a guaranteed interest rate and, at age 100, equaled the death benefit. If you died prior to age 100 your beneficiaries received the full death benefit. If you lived to age 100 you received an income tax free check for the full amount of the death benefit, the cash value. The cash value fund came from premiums the customer paid that were above the actual cost of insurance. Those over-payments, depending on the interest environment when the policy was sold, grew at a guaranteed interest rate that was as low as 1% and as high as 4%. Some policies were call participating because the cash fund benefited from the guaranteed interest and when the company paid a dividend, the dividend would be credited to the cash fund as well.
What It Is!
Fast forward to more challenging financial times. The guaranteed interest rates are at near historic lows. Because life expectancy has increased, the cost of insurance has increased. To offset these two negatives most (probably all) life insurance companies have changed the product so that the cash value account doesn’t equal the death benefit until age 120 (or higher). This factor has put a chink in the armor of one of the most touted upsides of the cash account, the ability to borrow from it. Now the cash value in new policies builds at the slowest rate in history making it a long wait for reserves that are high enough to be borrowed against.
What It Isn’t!
Because of the high cost of paying the cost of life insurance and paying additional to fund the cash account, whole life isn’t a product that can affordably meet the needs, temporary or permanent, for most families.
Hinerman Group can show you how to use other life insurance products that can fully meet your life insurance needs without breaking the bank. We fully believe your budget should be kept intact and within that parameter your family should be fully protected. Call us.