How Complex Is Dividend-Paying Whole Life Insurance?

Some financial advisors say whole life insurance is complicated, and that “you should never invest in something you don’t understand.” … Then they try to sell you stocks, bonds, mutual funds, and EFTs that most laypeople can only begin to truly grasp!

Dividend-paying whole life insurance is so simple an average 10-year-old can understand the concept in 10 minutes. We’ll prove it to you now …

The Simplicity of Dividend-Paying Whole Life Insurance

The concept behind a dividend-paying whole life insurance policy is extremely simple. It’s based on five easy-to-understand ideas:

1. Your Risk Is Minimized by the “Pooled Risk” Approach of Insurance

This timeless concept is at the foundation of all forms of insurance. In its simplest form, policy owners pay an insurance company a relatively small sum of money in advance. This is called a “premium.” In exchange, they are covered for a potentially much large expense later. In this case, they receive an agreed-upon amount to cover the costs and loss of income related to the death of the insured, which is called the “death benefit.”

2. You’re Guaranteed to Have “Level-for-Life” Premiums with a Whole Life Insurance Policy

The insurance company realizes that there’s a slight chance that an insured individual might pass away after just one premium payment is paid.

That risk is very slim, but the flip side of the coin is that the older you get, the greater your chance of dying within the coming year. Nevertheless, a whole life insurance policy is designed to last your whole life – regardless of how long you live.

Term life insurance deals with this by raising the premium periodically to cover the company’s ever-increasing risk. This can ultimately make the policy so expensive that the policy owner is unable to pay for it, and all too often the coverage of a term life insurance policy ends without any death benefit being paid at all.

Many people have observed that paying the premium for a policy for years and then not receiving any benefit makes that term life insurance policy extremely expensive.

Whole life insurance takes a different approach. The insurance company knows how much premium it will need to receive for your policy, assuming you live an average lifetime, and it spreads that amount out evenly. Thus, your premiums are guaranteed never to go up.

And you don’t have to pay extra for this guarantee.

In fact, you will never receive a letter from the insurance company that issued your whole life insurance policy that says, “We are experiencing increased costs, and we will be passing those additional costs on to you. Your new (increased) costs will be …” That is guaranteed never to happen – at least not with a whole life insurance policy.

3. The Cash Value of Your Whole Life Insurance Policy Is Guaranteed to Grow with “Every-Year Consistency”

A portion of each whole life insurance premium payment is automatically credited to a savings component (called the “cash value”) of the policy. This cash value grows each year by a pre-set and guaranteed amount. Having access to this cash value – during your lifetime – is just one of the living benefits of your whole life insurance policy.

You will know the minimum guaranteed amount of your cash value account at any time in the future. These amounts (guaranteed in writing, by the way) are all listed in a chart your insurance advisor will give you before you decide to purchase the policy.

4. Dividends Give Your Whole Life Policy “Shot-in-the-Arm” Growth as They’re Paid

If the insurance company you purchase a policy from is owned by stockholders, then the stockholders receive the profits the company earns.

However, if your company is in essence owned by the policy owners (these companies are called participating or mutual companies), you share in the profits. The profits paid to you are called dividends.

Dividends are not guaranteed, but … some participating companies have paid dividends consistently every year for over 100 years – even during the Great Depression. These are the companies Bank On Yourself Professionals recommend.

Dividends are great! And even though they’re not guaranteed, every single Bank On Yourself-type life insurance policy ever written by a Bank On Yourself Professional has paid dividends every year.

You could take those dividends in cash and spend them – and that makes perfect sense when you’re taking income from your Bank On Yourself-type life insurance policy in retirement.

But aside from that, savvy policy owners tell the insurance company to use the dividends to purchase additional coverage. (Hey, it’s more death benefit without a penny more out of your pocket!)

And when your death benefit grows, your cash value grows, too, in the most efficient way possible.

5. Whole Life Insurance Policies Are Chock Full of Guarantees to Protect You

A dividend-paying whole life insurance policy comes with guarantees that cover every component of the policy, except the payment of dividends (see above). And the insurance company is required by law to keep enough reserves on hand to back up those guarantees for every single whole life policy it issues.

• Your coverage is guaranteed for life. It cannot be cancelled (as long as premiums are paid, of course. And remember, your premiums won’t go up!)
• The company guarantees that the death benefit will never decrease
• Your cash value is guaranteed to increase each year, and each year’s increase is “locked in.” It’s not subject in any way to market risk
• If you need cash for any purpose, you are guaranteed the ability to borrow against your cash value, at competitive rates – and you can recapture that interest back into your policy as you pay back your loans. You don’t have to fill out a loan application, and your request cannot be turned down
• You’ll have guaranteed income tax-deferred growth of your cash value every year, and you can take tax-free retirement income, under current tax law
• The policy’s guaranteed death benefit will be paid income tax-free to the beneficiaries, under current tax law

All forms of life insurance have some guarantees, but only whole life insurance gives you all those guarantees

In addition, with a whole life insurance policy, the insurance company assumes the risk of poor investment performance. With every other form of permanent life insurance, you – the policy owner – assume that risk. And when you assume that risk, it means you’re agreeing that if the insurance company’s investments don’t pay off as well as planned – or if their costs are higher than they expected – you will make up your share of the difference – out of your own pocket!

How to Find out More About Bank On Yourself-Type Dividend-Paying Whole Life Insurance Policies

In this article, we’ve shown you the five simple concepts on which a dividend-paying whole life insurance policy is based. We’ve also reviewed the guarantees the insurance company makes to you when you decide to purchase a whole life insurance policy.

It’s really that simple. … Of course, if you’re someone who really wants to dig deeper, there is more you can learn. For example …

• There’s a multiple-layer safety net that backs up all the guarantees of your whole life insurance policy

• Some whole life insurance policies can be enhanced with the addition of certain optional provisions (called riders), that will make your cash value grow much more quickly, especially in the early years of the policy

  When those riders are added, the insurance advisor who helped you purchase the policy will have his commission reduced by 50 – 70%. That’s one reason most advisors don’t even talk about those riders. We can show you how to find an advisor who specializes in policies with these riders.

• When you borrow against your whole life insurance policy, the cash value can continue to grow, just as if you hadn’t touched a dime of it – if your policy is from one of the handful of companies that offers this feature
• Both the cash value and the death benefit of your whole life policy can increase well beyond the guarantees listed in the policy – if your policy is structured properly. Those “extra” increases have benefitted families and individuals for more than a century!

If you’d like to learn even more about dividend-paying whole life insurance, take a look at the comprehensive online Consumer Guide to Life Insurance. You’re welcome to browse. We prepared the Consumer Guide to Life Insurance just for inquisitive learners like you!

Learn How Super-Charged Dividend-Paying Whole Life Insurance Can Help You Reach Your Financial Goals and Dreams – Without Taking Any Unnecessary Risks

If you want to discover why Bank On Yourself-type policies outperform other types of whole life insurance policies, download our FREE Special Report, 5 Simple Steps to Bypass Wall Street, Beat the Banks at Their Own Game and Take Control of Your Financial Future.

While most term life insurance policies are relatively similar to one another, dividend-paying whole life insurance policies can be customized to meet very specific needs and objectives – your specific needs and objectives.

And that’s why your next step is to find out specifically what a Bank On Yourself-type whole life insurance policy can do for you and those you care about.

To learn how a custom-tailored Bank On Yourself program can help you reach your financial goals (there’s no cost or obligation), request your free Analysis. You’ll be referred to a Bank on Yourself Professional – a life insurance agent with advanced training in this concept – who can answer all your questions and, when you’re ready, get things moving.