Whole Life Insurance Premiums: How Flexible Are They?
A few of the most common questions I often hear from clients when they are considering buying a Whole Life Policy are “Do I have to pay the premium for the rest of my life?”, or, “What if I can’t make a payment?” These concerns are based on the faulty assumption that they are obligating themselves to 100 years or so of premium payments!
That assumption is Incorrect!
The conversation I have with them after they ask those questions is usually an eye opener, especially when my answer to their question is “Only if you want to!”
I explain to my clients that, when we purchase a Whole Life Insurance policy, we are essentially partnering with a Mutually Owned Life Insurance company and leveraging that company’s strength, assets, and track record as a terrific place for us to store capital.
In return for our premium dollars, as part of our contract with the company, we receive favorable and certain cash value treatment, as well as a death benefit.
Now, when we go into partnership with this company (aka: open a policy), we want to give them an idea of how many dollars we plan to move into the policy over time, so their actuaries and underwriters can make a very fair agreement with us that shows the value we can expect over time based on our partnership.
But life happens. And they know that. And we know that. And that is why, when we properly design a policy for our clients here at Paradigm Life, we build in provisions for life’s curveballs, such as:
- Perhaps you made less money one year – we can contribute less to the policy (maybe even skip a contribution)
- Made more money one year – we can build in room to absorb more dollars (this is a good problem to have!)
- Lost a job – not only is a policy a potential source of capital when you need it, but it can often carry itself until you are ready to move money back into it
- Became disabled/unable to work – certain policy provisions (Like Waiver of Premium for Disability) can pay the base premium (or more) for you if you can’t work
- Want to stop paying the premium – we can either temporarily or permanently stop premium payments
- Need an additional source of income – policy values, or even dividends, can be used as a source of income
Now, granted, all of these changes may adjust the values of different parts of the policy (some may adjust up, some may adjust down).
But we are partnering with the insurance company, we are the owner of a Whole Life Policy, we have a lot more flexibility than we may have imagined at first.
You and I both know that life is going to throw something our way. The question is…are you ready???