Whole Life vs. Universal Life-The Battle of Permanent Life Insurance

Up until the 1970’s, whole life insurance was the only game in town, providing guarantees in the form of death benefit and cash value buildup for everyday Americans planning their futures.

Then came the exponential growth and popularity of equity investments, prompting the insurance companies to respond with the invention of the universal life plan. Universal life insurance offers premium flexibility based on interest rates, resulting in the opportunity for less expensive permanent life insurance. If interest rates are on the rise, universal life insurance will outperform whole life insurance. However, the flip side is when interest rates are down, the universal life policy may require additional premium to maintain cash values and sometimes even to keep the policy in force. And so this is where the rub lies. If you are very confident long term interest rates will be high, universal life insurance may be the way to go for you.

We are finding, with the economy slumping, and the stock market incredibly volatile, many consumers are looking for guarantees in retirement. They are ok with moderate gains, as long as they are gains they can count on. It’s funny sometimes how things come full circle. Loads of underfunded universal life policies are now lapsing due to low interest rates, with no guarantees anything will change in the near future. Whole life insurance is making a big comeback because the premiums and death benefit are guaranteed, with average policy cash value build up of 4-5%. Consumers are going back to basics, building their nest egg through a combination of insurance and investment products.

While universal life products certainly make sense in certain estate planning situations, we believe whole life insurance is the clear winner for long term value and piece of mind. Whole life insurance working in conjunction with your 401K or IRA sets a great foundation during the build up phase of retirement planning. Contact us today for more details on all of our strategies and of course with any questions you may have. Our main priority is focusing on the ‘guaranteed’ parts of our client’s portfolio, to ensure care free retirement.