Whole Life Insurance: Steady Premiums for Guaranteed Values

Whole Life Insurance has been overshadowed in recent years by the likes of Equity Indexed Universal Life and other more complex investment/insurance vehicles that offer slightly more flexibility and the promise of greater financial gains.  The advent of these more complex tools has made the decision of when a Whole Life Insurance policy is an appropriate option for a prospective or existing client.  There is a simplicity to the Whole Life Insurance that can be attractive to people looking for a conservative addition to their savings portfolio alongside the traditional life insurance death benefits and peace of mind that their families will be financially secure after they are gone.  Whole Life Insurance is a solid player with steady premiums and guaranteed values that may have a benefit for clients in certain tax brackets.

Whole Life is with you for the Long Haul

The basic feature of whole life insurance involves a premium that is essentially split into to parts.  The first part pays the fees, and the cost of the insurance itself, while the second part is invested in a comparatively conservative yield fund that accrues interest over time.  As long as the policy is in force and has not lapsed due to non-payment of premiums, Whole Life sticks with the client for…well… their whole life.  Unlike non-permanent insurance and Term Life, Whole Life allows the policyholder to withdraw the cash value from their policy to compliment retirement expenses and boasts the same favorable tax deferments as other permanent policies.

The Difference Between Whole Life and Indexed Life Insurance

The greatest difference between Whole Life Insurance and other forms of Universal Insurance such as Equity Indexed policies and Variable Universal Life policies is in the cash value and cash accumulation options.  With Whole Life, both the interest paid to the policyholder and the premium amount is fixed.  This makes a Whole Life policy very easy to budget for as it will remain unchanged throughout the life of the policyholder.  

The drawback to the fixed interest rate is that it is typically lower than what a client may be able to realize utilizing more traditional financial investment vehicles such as a 401k or a Roth IRA.  A Whole Life policy is more on par with a savings account than an investment account.  This somewhat limits who would benefit financially from a Whole Life policy.

Which Client Would Benefit from a Whole Life Policy?

Since there are more profitable ways to invest their money than the yields on a Whole Life policy, the strength of Whole Life comes in to play if your client has:

• Substantial Wealth
• Maxed out their 401k and Roth IRAs
• Need for a Tax-deferred addition to their portfolio

In many states, the cash value of a Whole Life Insurance policy is protected from creditors making it a safe place to park money while maintaining the benefit of life insurance.  As with any policy, however, the ability to pay for the insurance premium is everything.  The premiums on Whole Life Insurance and any permanent insurance are much higher than Term Life and a lapsed policy would represent an enormous loss of investment for your client.  

Whole Life Might be right for your High-End Clientele

If your client is in the right position, the tax implications and bond-like returns may be a perfect fit for their portfolio.  Clients who have done everything else that they can with their other retirement accounts will likely see the benefit of a Whole Life Policy for the long haul.