What is the Rate of Return in a Life Insurance Policy?

Ask any financial planner or investment advisor and most of them will tell you they can help you earn a higher rate of return on your money than what you will earn in a participating whole life insurance policy.

First of all, this isn’t even an apples-to-apples comparison because purchasing a life insurance has a cost which must be considered. The death benefit is an expense you pay for with premium dollars. Once the guaranteed cash value of the policy is greater than the premium you have paid for the policy, you will have more money in your pocket if you cancel the policy than if you hadn’t ever purchased it. This return of your premium is the cost of your life insurance.

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After you have reached this point in a participating whole life insurance policy, the annual return on your premium paid each year is phenomenal. For example, a 25-year-old, who by year 10 has more cash value in his policy than what the policy has cost him, will see a 56.529% return on his premium for year 11 represented in his guaranteed cash value increase from the previous year. “How do you like them apples?”

Of course, unlike investments which grow based on compounding interest, a participating whole life policy doesn’t earn compound interest but is guaranteed to grow every year until the cash value equals the death benefit. For example, in 25 years, this same policy taken out by the 25-year-old, is guaranteed to increase cash value by 92.876% more than the premiums paid for the policy that year.

The cash values of the policy have been greater than the cost basis of this policy since year 10. After this the type of annual returns on premiums paid is nothing short of amazing. Now where is the financial planner or investment adviser? Time is of the essence. Taking time to understand the value of what whole life insurance has to offer and being willing to invest the time for these kind of returns takes vision.

People who understand money and how to control it, even using it to make and keep more of it, use participating whole life insurance. They don’t use it as an investment but as a place which guarantees to keep their money growing safely while they leverage their cash values to make other investments. In doing so, they keep the growth in the policy, plus they keep the rate of return on the investments. In other words, they get a twofer. Two for the cost of one, PLUS a death benefit.

Never get caught up in the rate of return game. Only people who don’t understand how it all works are hoodwinked into believing that an investment, which requires you to assume risk, will produce greater profits. Actual profits are based on what you keep rather than nominal values. Participating whole life insurance guarantees you actual values, while giving you opportunity to take on scheduled risks without losing the growth of your own money.

We design and sell life insurance which can help you keep more of the money you make.

Dr. Tomas P. McFie

Most Americans depend on Social Security for retirement income. Even when people think they’re saving money, taxes, fees, investment losses and market volatility take most of their money away. Tom McFie is the founder of McFie Insurance which helps people keep more of the money they make, so they can have financial peace of mind. His latest book, A Biblical Guide to Personal Finance, can be purchased here.