How often do you think about what life insurance can really do for you? If you're like most Americans, it's probably not very often. At its core, whole life insurance offers a way to protect your family upon your passing, through its death benefit.1
However, when we take in the whole perspective, whole life insurance has many additional benefits such as a cash value component that grows over time, riders that can provide additional protection, and the ability to pay additional premium to help grow the cash value quicker.2
Protection
Whole life is an essential part of planning for the unexpected, by covering you and your loved ones for your entire lifetime.
Growth
Whole life’s cash value continues to grow no matter what happens in the stock market. This cash value, that grows tax-deferred,3 is the amount accumulated over time, through the premium payments you must make and the dividends paid into your policy.4
Diversification
The presence of cash value helps make whole life insurance a strong asset for diversifying your financial portfolio.
When we view whole life from a fresh angle as a way to diversify your financial portfolio, it does something unique. Whole life can help reduce overall portfolio risk and protect portfolio performance, so you may be both better protected and better rewarded.
Here's what it looks like.
Traditional Mix
This traditional mix of investments seeks to balance the volatility that comes with market exposure with a mix of bonds and stocks that helps offset inflation, the continual rise in your cost of living. You want the return on your investments to be greater than inflation to maintain and grow the value of your money.
Whole Life Mix
When a whole life policy’s cash value is added to the portfolio mix, we can gain a new perspective as both risk and reward can be affected for the better. Whole life is insulated from market fluctuations because it’s not affected by day-to-day volatility, unlike stocks and bonds. The addition of whole life can help broaden your financial outlook.
What about the reward? When you have a traditional portfolio mix and add whole life with cash value (CV), you gain many additional benefits: the steady growth of whole life’s cash value; a guaranteed death benefit for life; unique, built-in tax advantages; optional riders to protect from disability or illness; and the ability to add additional premium to help grow the policy’s cash value quicker.5 It may also protect its cash value from creditors, depending on your state.6
Risk vs. Reward
Market risk leaves you exposed to market ups and downs, which is why some people add bonds to their portfolio to help reduce risk, even though it can sacrifice upside potential. Meanwhile, a portfolio consisting of entirely bonds typically has a low rate of return, leaving you vulnerable to inflation.
But what if you could have less risk and still get more reward? There are few times in life when that’s possible — using whole life in your financial portfolio may help.
How do you balance risk and reward on a daily basis? Let's find out. Choose your answer that best fits.
On your drive to work, you notice the low-gas warning. What do you do?
The decisions you make every day usually have a risk and reward tradeoff, even if they're low-stakes. However, there are some rare instances when you can both lower risk and increase reward, like when you add whole life to your portfolio.
KEEP READING
When actively diversifying your portfolio with whole life, the company you choose can make all the difference. Do your research and understand the financial strength,7 structure and values of the company you're working with. Who you buy from matters.
In addition to whole life’s guaranteed death benefit8 and a more diversified portfolio, you are continually building cash value in your whole life policy. This value can be accessed for many opportunities, such as supplemental retirement income, to help fund college, or to help finance a new business, just to name a few.9
Speak with your financial professional to get the whole perspective on how whole life can help you protect your loved ones and diversify your financial portfolio.
1. Whole life insurance is intended to provide death benefit protection for an individual’s entire life. With payment of the required guaranteed fixed premiums, you will receive a guaranteed death benefit and guaranteed cash values inside the policy.
2. Some whole life policies don’t have any cash values in years one or two. Whole life insurance should be considered for its long term value. Early cash value accumulation and early payment of dividends depend upon policy type and/or policy design, and cash value accumulation is offset by insurance and company expenses. Consult with your Guardian representative and refer to your whole life insurance illustration for more information about your particular life insurance policy.
3. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice.
4. Dividends are not guaranteed. They are declared annually by Guardian’s Board of Directors.
5. Riders may incur an additional cost or premium. Rider benefits may not be available in all states.
6. State creditor protection for life insurance policies varies by state. Contact your state’s insurance department or consult your legal advisor regarding your individual situation.
7. Financial information concerning Guardian as of December 31, 2021, on a statutory basis: Admitted assets = $72.1 billion; liabilities = $63.5 billion (including $51.8 billion of reserves); and surplus = $8.6 billion.
8. All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.
9. Financial information concerning Guardian as of December 31, 2021, on a statutory basis: Admitted assets = $72.1 billion; liabilities = $63.5 billion (including $51.8 billion of reserves); and surplus = $8.6 billion.
This content is intended for general public use and is for educational purposes only. By providing this content, Park Avenue Securities LLC is not undertaking to provide any recommendations or investment advice regarding any specific account type, service, investment strategy or product to any specific individual or situation, or to otherwise act in any fiduciary or other capacity. Please contact a financial professional for guidance and information that is specific to your individual situation.
