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    Protection in Market Uncertainty

    Protection in Market Uncertainty

    Life Insurance

    Why whole life insurance might prove especially advantageous in today's environment

    If you’re thinking about purchasing life insurance, you have numerous choices available to you. Term insurance offers coverage for a specific period of time, while permanent insurance, as its name implies, offers coverage for the rest of your life. 

    If you’re thinking about permanent protection, you can choose from whole life, variable life and universal life. All offer their own unique benefits, but in today’s environment, whole life may deserve special attention. Here’s why…

    Whole Life in Brief

    Like universal and variable life, whole life offers benefits beyond protection. Only a portion of the premiums you pay for your policy goes toward the cost of insurance. Much of the remainder is allowed to accumulate as cash value.

    Unlike universal and variable life, however, whole life offers greater assurance, as well as insurance. Your cash value grows at a fixed rate that is guaranteed over the life of the policy. In addition, whole life may offer dividends that are based on the profitability of the issuing insurance company. 

    Put it all together and you have a vehicle that can not only provide you with insurance protection, but guaranteed income that in today’s environment may well exceed the income available from money market funds, bank CDs, US Treasury Securities and even some corporate bond funds. 

    Finally, cash value in a whole life policy can never diminish as a result of prevailing market conditions. Moreover, you can access cash value for emergency expenses through withdrawals or loans, the latter of which results in no tax liability (you should realize, however, that accessing cash value without replenishing it at some point will reduce your policy’s death benefit).

    What about term insurance?

    Term insurance offers protection for a limited period of time. It also offers no cash value. However, term insurance premiums are considerably less expensive than those required to purchase a whole life policy. In the past, many financial planners have suggested that if you need life insurance, buy term and invest the difference between the premiums you pay and the cost of whole life. In this environment, however, where will that difference be invested – in low yielding fixed income securities?

    The chart below displays recent Certificate of Deposit rates at a well-known national bank. As you’ll see, even in CDs with the longest maturities, rates are under 1%. Moreover, the income you earn is fully taxable. In other words, you could essentially be earning nothing after taxes in exchange for the safety you hope to achieve.

    Whole life insurance is not a surrogate for fixed income investments, but it can provide you with the protection you’re seeking for your family, as well as income that, in our current low interest rate environment, may prove more attractive than many other alternatives.

    Certificates of Deposit

    (If any principal is withdrawn before the maturity date, a penalty will be imposed which may result in partial loss of principal.)

    Account Type

    Interest
    Rate

    Annual Percentage
    Yield (APY*)

    Compounding   Method

    Min. Bal.
    to Open

    Min. Bal. To
    Obtain APY*

    3 Month CD

    0.25%

    0.25%

    Continuous

    $2,500

    $2,500

    6 Month CD

    0.40%

    0.40%

    Continuous

    $500  

    $500  

    8 Month CD

    0.40%

    0.40%

    Continuous

    $500  

    $500  

    9 Month CD

    0.50%

    0.50%

    Continuous

    $500  

    $500  

    10 Month CD

    0.50%

    0.50%

    Continuous

    $500  

    $500  

    12 Month CD

    0.50%

    0.50%

    Continuous

    $100

    $100

    14 Month CD

    0.50% 

    0.50%

    Continuous

    $100

    $100

    15 Month CD

    0.50%

    0.50%

    Continuous

    $100

    $100

    18 Month CD

    0.50%

    0.50%

    Continuous

    $100

    $100

    24 Month CD

    0.60%

    0.60%

    Continuous

    $100

    $100

    30 Month CD

    0.60%

    0.60%

    Continuous

    $100

    $100

    36 Month CD

    0.60%

    0.60%

    Continuous

    $100

    $100

    42 Month CD

    0.60%

    0.60%

    Continuous

    $100

    $100

    5 & 10 Year CD

    0.75%

    0.75%

    Continuous

    $100

    $100

    18 Month IRA CD

    0.49%

    0.50%

    Continuous

    $250

    $250

     

    The decision to purchase life insurance should be based on long-term financial goals and the need for a death benefit. Life insurance is not an appropriate vehicle for short-term savings or short-term investment strategies. While the policy allows for loans, you should know that there may be little to no cash value available for loans in the policy’s early years.


    Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC,90 Park Ave. 17th Floor, New York, NY 10016, 212.536.6000. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Lenox Advisor, Inc., its employees, or representatives are not authorized to give legal or tax advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal tax or legal counsel. CRN202209-271025