We got an interesting question about whole life policies and how interest from the savings is supposed to help pay for the premium amounts.

I remember many years ago taking out a whole life policy and one of the big selling features was that eventually the policy would be paid up by the interest earned on the cash I was "investing". This was around 1985 and interest rates were much higher than they are now.

So the question I'm going to ask is: if you took a 20 year whole life insurance policy out in 1987 and the payment structure was based on 15% interest rates, would you still be stuck with a balance on the account, after 20 years because the current interest rates are 1.75%?

Obviously 1.75% interest rate won't help pay off your policy like 15% will. I'm wondering about the wording in the life insurance contract and how it deals with that.

If you have a whole life insurance policy like the one I'm describing, I encourage you to have a look at it. You don't need surprises 20 years later!

Articles from February 2006
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