Whole Life Insurance, a Popular Product During Hard Times

Due to the recent recession, there has been some debate about the latest trend favoring whole life insurance over term insurance. The truth is that whole life insurance offers more benefits than the traditionally favored and cheaper term life insurance policy would.

Comparing life insurance options

Term insurance is more affordable and easier to buy than whole life insurance; this can be easily confirmed by comparing term life insurance quotes online yourself.  This alone is the main reason that term life insurance is recommended to most life insurance shoppers. And this makes perfect sense when you consider that a term policy with a $500K death benefit is going to pay the exact same benefit as a whole life policy with a $500K death benefit would. They are identical, expect for the hefty price tag whole life insurance comes with.

While that can be a major deterrent for most, there are two reasons for the price difference.  Traditional whole life insurance coverage can be maintained to age 100, and traditional whole life insurance builds equity over time called "cash value."  The added benefit of a whole life policy is that while you get the same coverage, you also get an investment aspect to the policy with cash value.

Due to whole life insurance’s expensive price tag, it isn’t as attractive as most other investment products out there. However, it is a great option for those shoppers who want an investment and a life insurance policy. This way you are protected, but you still have a benefit of the cash value if you outlive your needs for the policy, whereas you get no return on a term policy.

Whole life insurance Shines

During troubled times, one would expect cheap term life insurance to gain popularity, being the most affordable option. However, the economy was hit hard and stocks essentially became devalued while interest rates dropped.  This led to the popularity of whole life insurance, as it is unaffected by such economic upsets. The rate of cash value growth in each policy is guaranteed when the policy goes in affect. 

Shoulda, Coulda, Woulda

The catch in all this is that in order to truly benefit from a whole life policy, you would have had to have bought the policy in advance of the economy tanking. Having done that would have locked in reasonable rates and you would still, to this day, be receiving the growth benefits, and your cash value would be nicely accumulating. However, buying a policy now means that you will lock in low rates and continue with those rates as long as your policy is active.

So while it shines today, it only shines for those who invested yesterday.