RETIREMENT / EMPLOYEE BENEFIT Consulting
Between 1940 and 1970 it was quite common for people to purchase whole life insurance because term insurance was not as prevalent.
Then in 1981 the Tax Equity and Fiscal Responsibility Act or TEFRA was passed and many insurance companies and banks became interest sensitive and consumers started to question the rates of return from the whole life insurance policies.
Many started to put their money into the stock market rather than insurance policies. So there was a shift to term insurance instead of solving any future life insurance needs.
Following market fluctuations the industry gravitated to whole life products that reflected a more stable rate of return that counteracted the market fluctuations. They call these index universal life products.
These "hybrid" whole life policies have a living benefit and a tax-sheltered cash account that builds up inside the policy. You don't pay taxes on the gain each year and the money can e used to supplement retirement planning. These benefits do not exist in a term policy.
Term insurance policies, sometimes referred to as temporary life, allow one to have coverage for a fixed period of time at, oftentimes an affordable rate, with the premium remaining level.
Whole life premiums remain level for the life of the policy, however, with the new index products the premiums can be adjusted and/or designed for each respective need(s).