As a kid, you probably saw your parents huddled around the kitchen table with a local insurance agent, ensuring “the family was taken care of.” Later, that same agent may have come by the house once a week or once a month to collect some money from them. What were your parents buying? The same life insurance seems to be coming back in whole life insurance.
Why the resurgence of interest in whole life insurance? After all, it can be expensive; you can get a lot more “bang for your buck” with term life insurance.
There are several reasons for this renewed interest.
Interest rates are at historic lows, but whole life insurance policies pay guaranteed rates well above comparable duration certificates of deposit, and there is no current taxation on the growth of cash values.
The insurance industry continues to develop new variations of whole life insurance. The more unique policies go beyond traditional full life insurance with features designed to help protect your cash value.
Tax avoidance is still high on everyone’s list, even with recent capital gains and dividend tax rate reductions. In many cases, Life insurance proceeds can avoid taxation today and at death.
Finally, whole life insurance offers possibilities not available with term life insurance. If you make your premium payments long enough and accumulate enough cash value, you may be able to reduce or even stop your premium payments at some point, and your insurance coverage will still be there. Not so with term life insurance. You can borrow money without going through the loan approval process and often pay it back on your own terms or at all.
In an uncertain world, the certainties of whole life insurance can be a welcome benefit. Rather than buying term life, investing the difference, paying taxes on the investments, and risking the loss of insurance coverage over one missed or late payment, more and more people are again opting for the sureties of whole life.