When you were a kid you probably saw your parents huddled around the kitchen table with a local insurance agent, making sure “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 a bit of money from them. What were your parents buying? The same life insurance that seems to be coming back in vogue—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 that are 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 newer policies go beyond traditional whole life insurance with features designed to help protect your cash value.
Tax avoidance is still high on everyone’s list, even with recent reductions in capital gains and dividend tax rates. Life insurance proceeds can, in many cases, avoid taxation both 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 you can often pay it back on your own terms, or even not 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 once again opting for the sureties of whole life.