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Whole life — A new asset class to allocate?

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Clients who think they have seen all that whole life insurance has to offer need to take a closer look.

Insurance carriers have taken steps to bring whole life products back to relevance in today’s competitive environment. In order to compete in a crowded marketplace for insurance products, carriers have developed options to allow clients to transform a traditional whole life policy into a flexible long-term investment product that can provide built-in protection against illness or disability.

While these products continue to protect clients’ families against premature death and can provide substantial tax advantages, new policy features give clients control over both premiums and policy benefits beyond pure life insurance protection, adding flexibility without sacrificing the fundamental values of whole life insurance.

What’s new in whole life?

At its most basic level, a whole life insurance product offers the client permanent life insurance protection as well as tax-free access to the accumulated cash value in the policy. As the options that accompany other types of financial products have expanded in recent years, insurance carriers have developed a library of product features that allow clients to modify the base protection of whole life to suit their individual needs.

Many of these benefits are provided in the form of optional riders, such as the one-year term rider that allows clients to blend permanent life insurance with term life insurance for a period (in this case, one year) in order to increase the death benefit payable under the policy. These riders can be useful for clients who anticipate a short-term need for a higher level of insurance coverage, or who wish to increase their level of protection without the fees often associated with purchasing a separate policy.

See also: 10 timely life insurance riders

Along the same lines, a paid-up additions rider can allow the policyholder to increase the death benefit or cash value of the policy without long-term commitment. The client can surrender all or a part of the paid-up additions for their cash value or use them to secure a policy loan without surrendering the entire policy.

Unlocking the policy value during life

Today’s whole life policies offer an array of features that allow clients to access the cash value of the policy or death benefits during life, whether through an accelerated death benefits rider or tax-free policy loans. Many companies now provide options to reduce the interest associated with these loans through variable loan rates — and the interest can often be repaid with the policy dividends themselves (though the loan itself will reduce any death benefit associated with the policy).

Critical care or disability income riders give clients the option of receiving policy benefits not upon death or through loans, but in the event that they require long-term care or become disabled and unable to earn income yet wish to keep the policy in force.

Further, clients can simply choose to take any policy dividends as cash, much like in the context of a traditional investment product, rather than leaving them in the policy to increase the cash value or death benefit.


The library of options now available to clients who purchase whole life insurance policies may make these products more attractive than ever. It also increases the client’s need for professional guidance to help evaluate the features that will best suit individual needs.

For more on whole life, see:

LIMRA: Life premiums up 6% YTD

Life insurance’s global boom

Is premium financing right for your high-net-worth client?


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