Guaranteed vs. Non-Guaranteed Permanent Life Insurance Policies
Fifty years ago, most life insurance policies sold were guaranteed and
offered by mutual fund companies. Choices were limited to term,
Guaranteed versus Non-Guaranteed Policies
Today, companies offer a broad range of guaranteed and non-guaranteed
life insurance policies. A guaranteed policy is one in which the insurer
assumes all the risk and contractually guarantees the death benefit in
exchange for a set premium payment. If investments underperform or
expenses go up, the insurer has to absorb the loss. With a
non-guaranteed policy the owner, in exchange for a lower premium and
possibly better return, is assuming much of the investment risk as well
as giving the insurer the right to increase policy fees. If things do
not work out as planned, the policy owner has to absorb the cost and pay
a higher premium.endowment or whole life policies. It was simple, you
paid a high, set premium and the insurance company guaranteed the death
benefit. All of that changed in the 1980s. Interest rates soared, and
policy owners surrendered their coverage to invest the cash value in
higher interest paying non-insurance products. To compete,
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