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Whole life insurance has been around a long time… Its origins date all the way back to the 1760's. Whole life insurance dominated the market for decades until universal life insurance was introduced in the late 1970s. Whole life sales began to drop after the Life Insurance Company of California (later E.F. Hutton Life) introduced universal life insurance in 1979.

In recent years however, whole life insurance has made a comeback. From 2000 – 2008, the whole life market share was in the lower 20% range. Today, whole life’s market share exceeds 35%. According to the Life Insurance Market Research Association (LIMRA):

"Whole life new premium jumped 25% in the second quarter (of 2021) and policy count increased 5%, compared with the prior year. Whole life product sales experienced the largest growth in terms of absolute dollars and policies sold. Three-quarters of whole life carriers reported positive growth, including nine of the top 10 carriers. Year to date (YTD), whole life premium was 22% higher than sales in the first six months of 2020. Whole life represented 36% of the U.S. life insurance market in the second quarter."

There are many factors driving whole life sales, the most prominent would be the guarantees. Whole life insurance provides:

  1. Guaranteed level premiums. Alternatively, provides a guaranteed death benefit assuming the level premiums are paid.
  2. Guaranteed Cash Values – regardless of which way the economy goes, there will be a guaranteed base level of cash value.

In addition to these guarantees, whole life provides an upside of cash value based on a non-guaranteed dividend scale. It is these features that make whole life attractive to the consumer.

Life insurance can be a valuable asset if properly utilized in a retirement income plan. But are you confident in which type of policy is best for you? Let’s compare indexed universal life (IUL) vs. whole life insurance here so you can make the best financial decision for your retirement.

Traditional / Accumulation IUL

Indexed Universal Life (IUL) is an attractive alternative to whole life. The policy has flexibility with regards to premium payments, has potentially higher cash accumulation, higher income potential, along with a death benefit. The downside to an accumulation IUL is that the death benefit is not guaranteed.

Protection IUL

A Protection IUL is one that is design to provide the upside of an indexed product while still guaranteeing the death benefit. The premium outlay is typically less than a whole life, and the policy stays in force to age 121 based on a projected rate of return. The downside to these products is that the guarantee usually runs out between ages 80-90. In many cases, this is right at (or even below) life expectancy. This represents a shift of risk to the insured for market performance.

Guaranteed IUL

Guaranteed IUL is one that extends the guarantee to age 121. For the same price of a whole life policy, it will guarantee the death benefit. In addition, you have a much higher potential of cash value as well as a higher potential income stream in most cases. Let’s consider the following examples. In each example, we are showing premiums to age 65.

    Guaranteed IUL Whole Life
Age Premium Cash Value @ age 65 Income ages 66-100 Cash Value @ age 65 Income ages 66-100
35 $16,790 $1,040,736 $53,207 $1,027,651 $44,707
45 $28,530 $858,045 $44,406 $837,882 $38,355
55 $65,140 $694,902 $37,684 $705,758 $34,750

The chart above is based on the default dividend scale for the whole life and default crediting rate for the guaranteed IUL. Both products provide for a guaranteed death benefit, current cash values as well as a potential income stream. In all these examples, the Guaranteed IUL provides more income and comparable (if not greater) cash value, with the same guaranteed death benefit, as the whole life. It would also be reasonable to assume the Guaranteed IUL’s performance will be greater, however, regulations within Actuarial Guideline 49 restrict the maximum illustrated rates. Click Here for more information on AG49 and its impact on IUL products.

If you are considering a whole life policy, you should add guaranteed IUL to your list of potential alternatives. Follow the link below to speak with our on-staff product expert about these policies:

Schedule a Time to Speak with our On-Staff CFP

Ralph Pence
Post by Ralph Pence
November 14, 2021