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Protection in Market Uncertainty

Life Insurance

Why whole life insurance might prove especially advantageous in today's environment

If you’re thinking about purchasing life insurance, you have numerous choices available to you. Term insurance offers coverage for a specific period of time, while permanent insurance, as its name implies, offers coverage for the rest of your life. 

If you’re thinking about permanent protection, you can choose from whole life, variable life, and universal life. All offer their own unique benefits, but in today’s environment, whole life may deserve special attention. Here’s why…

Whole Life in Brief

Like universal and variable life, whole life offers benefits beyond protection. Only a portion of the premiums you pay for your policy goes toward the cost of insurance. Much of the remainder is allowed to accumulate as cash value.

Unlike universal and variable life, however, whole life offers greater assurance, as well as insurance. Your cash value grows at a fixed rate that is guaranteed over the life of the policy. In addition, whole life may offer dividends that are based on the profitability of the issuing insurance company. 

Put it all together, and you have a vehicle that can not only provide you with insurance protection but guaranteed income that in today’s environment may well exceed the income available from money market funds, bank CDs, US Treasury Securities, and even some corporate bond funds. 

Finally, cash value in a whole life policy can never diminish as a result of prevailing market conditions. Moreover, you can access cash value for emergency expenses through withdrawals or loans, the latter of which results in no tax liability (you should realize, however, that accessing cash value without replenishing it at some point will reduce your policy’s death benefit).

What about term insurance?

Term insurance offers protection for a limited period of time. It also offers no cash value. However, term insurance premiums are considerably less expensive than those required to purchase a whole life policy. In the past, many financial planners have suggested that if you need life insurance, buy term and invest the difference between the premiums you pay and the cost of whole life. In this environment, however, where will that difference be invested – in low-yielding fixed income securities?

The chart below displays recent Certificate of Deposit rates at a well-known national bank. As you’ll see, even in CDs with the longest maturities, rates are under 1%. Moreover, the income you earn is fully taxable. In other words, you could essentially be earning nothing after taxes in exchange for the safety you hope to achieve.

Whole life insurance is not a surrogate for fixed income investments, but it can provide you with the protection you’re seeking for your family, as well as income that, in our current low-interest rate environment, may prove more attractive than many other alternatives.

Certificates of Deposit

(If any principal is withdrawn before the maturity date, a penalty will be imposed which may result in partial loss of principal.)

Account Type

Interest
Rate

Annual Percentage
Yield (APY*)

Compounding   Method

Min. Bal.
to Open

Min. Bal. To
Obtain APY*

3 Month CD

0.25%

0.25%

Continuous

$2,500

$2,500

6 Month CD

0.40%

0.40%

Continuous

$500  

$500  

8 Month CD

0.40%

0.40%

Continuous

$500  

$500  

9 Month CD

0.50%

0.50%

Continuous

$500  

$500  

10 Month CD

0.50%

0.50%

Continuous

$500  

$500  

12 Month CD

0.50%

0.50%

Continuous

$100

$100

14 Month CD

0.50% 

0.50%

Continuous

$100

$100

15 Month CD

0.50%

0.50%

Continuous

$100

$100

18 Month CD

0.50%

0.50%

Continuous

$100

$100

24 Month CD

0.60%

0.60%

Continuous

$100

$100

30 Month CD

0.60%

0.60%

Continuous

$100

$100

36 Month CD

0.60%

0.60%

Continuous

$100

$100

42 Month CD

0.60%

0.60%

Continuous

$100

$100

5 & 10 Year CD

0.75%

0.75%

Continuous

$100

$100

18 Month IRA CD

0.49%

0.50%

Continuous

$250

$250

*View full chart on mobile here or flip phone horizontal

The decision to purchase life insurance should be based on long-term financial goals and the need for a death benefit. Life insurance is not an appropriate vehicle for short-term savings or short-term investment strategies. While the policy allows for loans, you should know that there may be little to no cash value available for loans in the policy’s early years.

CRN202509-3039471

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