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Whole Life Insurance Policy Interest Dividendss Help Pay Premiums

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
More articles from Year 2006

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