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July 08, 2008 at 08:00 PM
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In short, whole life insurance best achieves the delicate balance between legacy and lifestyle. Whole life is one of the most common types of permanent life insurance on the market today. It provides a holistic layer of financial security because of its unique combination of asset accumulation and wealth preservation. It is the only product of its type to offer both living and death benefits – a valuable feature in today’s volatile economic climate and one exclusive to whole life.
One of the most prominent examples of how this unsung product helped create a lasting legacy occurred more than half a century ago when Walt Disney, unable to land a substantial bank loan, used the cash value from his whole life policy to build a sprawling theme park that is now known to the public as “the happiest place on earth.”
While whole life comes with a higher dollar commitment than term or other permanent products such as variable or universal life insurance, it offers unparalleled stability and a much greater value over the long-term when taking into account the internal rate of return of total premiums to death benefit at life expectancy. In addition, any favorable developments that occur during the policyholder’s life, such as lower-than-expected expenses, higher-than-guaranteed returns, or better-than-anticipated mortality, can be applied toward improving benefits and/or paying down premiums while still increasing the policy’s cash value accumulation.
A Matter of Life and Death Benefits
Whole life insurance is the only product of its kind. With whole life, policyholders have greater assurance of the deliverability of the death benefit and, therefore, can leverage its presence by using other assets during their lives.
These so-called “living benefits” allow policyholders the ability to meet a variety of different financial commitments – paying for college or expanding on a business – while still providing the all-important protection for beneficiaries in the event of death. Because increasing life expectancies have created the need for long-term care insurance, an enhanced accelerated benefit rider on a whole life policy enables access to more than the policy’s cash value for those in need of long-term care benefits. In times of economic uncertainty and sharp market fluctuations, this unique feature makes whole life a valuable product to consider – and one to discuss with clients who lack the economic memory to remember this country’s last recession.
Unlike borrowing against a 401(k) plan or bank financing, whole life policy loans aren’t subject to a credit check or penalty fees, though any amount that isn’t repaid will be deducted from the death benefit and cash-surrender value for the policy’s beneficiaries.
