Despite the strengths of whole life guaranteed cash value, many people attack the guaranteed ledger of a whole life insurance illustration because they believe they can do better.  Do better is a highly subjective and relative notion, but one major argument notes that with whole life insurance, you are guaranteed to lose money if you buy it.

Seems like a reasonable claim.  The ledger reflects a cash value less than your premiums in the first few years--a guaranteed negative return. 

If you look at a whole life policy illustration (that we provide to our clients and potential clients), you'll notice that the increase in cash value year-over-year is not linear.  Now in truth, the growth of cash value in a whole life policy that earns dividends will sometimes fail to increase by an ever-growing number year-over-year.

If the dividend rate drops significantly, it's possible that the growth in cash value could drop below the prior year.  Take special note here; we're not saying the cash value will be less; we're saying that the growth in cash value may be less than the year prior.

But back to that whole life illustration for a moment.  It shows us that the guaranteed accumulation of cash values produces an ever-growing result year over year.  This means that a very large reduction in the dividend could result in absolute growth in cash value that is less than the prior year. Still, the guaranteed cash value accumulation in a whole life policy will likely make this difference extremely small. 

If you want to hear more, please listen to the full episode.

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And if you'd like to see how a whole life policy might work for you just as we describe above, please click here to contact us. We'd love to help.