Life insurance has been around for thousands of years. It is believed that the Romans originated the product to fund burials of military personnel who were members of a burial club.
See also: A brief history of life insurance
Over time, the reasons for owning life insurance grew more complex, such as to meet estate planning or business planning needs, in addition to personal protection. Product innovations and designs also occurred to meet varying factors, including economic concerns, investment market cycles, medical advances and increases in longevity.
Throughout that time, one proposition has remained constant: None of us know when we’re going to die. Whole life insurance is uniquely positioned to meet that proposition and, thus, has seen a resurgence in popularity because unlike term insurance, it is a permanent life insurance product. And unlike variations of universal life products, it is not subject to interest rate and market fluctuations provided the required premiums are paid.
Once thought of as an expensive form of death protection, whole life insurance lends itself well to various scenarios. Among them:
Scenario 1: Clients who want a higher return with lower risk.
Given current low interests, which are yielding minuscule returns on bank and fixed income financial products, whole life insurance’s cash value growth is now seen as a higher-yielding financial product with similar risk profiles. Yes, it is still life insurance, but the cash value element is often thought of as a bond or CD alternative.
Insurance carriers guarantee an interest rate in cash values. Mutual companies like The Guardian Life Insurance Company of America also often provide an annual dividend which is not guaranteed, (although Guardian has paid a dividend every year since 1868). The dividend further increases cash values, all of which grows tax-deferred and can potentially be accessed income tax-free through withdrawals to basis and loans thereafter.
Scenario 2: Clients who want a healthy investment portfolio.
Whole life insurance is a non-correlated asset class in a healthy, diversified investment portfolio. For entrepreneurs and more aggressive investors, whole life insurance serves as a counter-balancing force against concentrated positions and aggressive investments.