Whole-Life Making a Comeback

The old-fashioned whole-life policy has proven to be more agile during these economic times than ever before. So, to whom? From what I witness, the same baby-boomer generation that was told to buy term and invest the rest in stocks or bonds. Though I was young, I remember watching the subject on television during the 90's and yes, it did seem like a good plan at first but no one anticipated a recession so great to make investments perform poorly. (To those who actually did invest.) Also, there was not clear explanation to many that term policies expire.

"Insurance is not an investment product." Remember this sentence. No self-respecting agent will convince you that insurance is an investment. It is however, smart financial planning and protection. Also, do not misuse the value of a whole-life policy to go shopping. Life insurance does offer a better interest rate than a normal savings account or CD from a bank, (plus the death benefit of thousands of dollars of course) but the intention is not for investing to increase income.

Upon the expiration of the term policies, thousands of people in their retirement years are left to pay higher premiums based on their age and state of health. Only few can afford to pay hundreds of dollars on a term policy after the age of 65. If during the years of the Term policy, a person does not save money away for final planning, then to seek coverage comes without choice. The highest I have been told by a lady shopping for coverage was over $500 dollars a month to renew an expired term policy. For this much amount, it is probably better to deposit in a savings account. Holding on to a small whole-life policy would have prevented the matter because the premium would have been locked in for life.

Painting a picture:
Year 1995 Man age 45: Whole Life is $70 monthly, 20-yr Term is $45 monthly
Year 2015, 20-year Term expires.

Man age 65: Whole life is still $70, with accrued dividends. Term policy renews at $380 monthly
Man age 80: Whole life is paid, or took extended insurance. Term policy is unaffordable beyond reason.
Most term policies become annual renewable after the initial policy term expires. The annual premium increases every year thereafter. Companies will not write a 20-year term policy for someone over the age of 65.

Whole-life and Term do the same, pay a death benefit. However whole-life is permanent with a savings component. You will hear or may have heard of "cash value" policies, but it is easy to misunderstand the different types that are offered as each carrier varies. There are companies that sell Universal Life and Term policies bearing some whole-life qualities. Always read your paperwork and ask questions. Whole-life is simple, it has not changed and the reason for its comeback is its reliability.

Whether for a small death benefit or a very large amount, those who did not take the advice of replacing their policies with Term, still have insurance today. Many have policies that have been paid in full while others have policies on extended insurance. Extended insurance is when the value of the policy is used to pay premiums- highly useful for seniors no longer able to work. It does not hurt to consider investing, but at the risk of experiencing little to no gain. It is best to keep your final planning separate from financial ventures until there is demonstrated improvement in the economy. Should an investment fail or 401k is depleted, a whole-life policy remains permanent.
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