Not many things are truly “guaranteed” in life. We can’t guarantee the weather, what other people will or won’t do, the direction of the markets, or even if we’ll be around to see tomorrow.
And even most “guarantees” have exceptions.
Your purchase is guaranteed – but only for 30 days, or unless you drop the item, get it wet, or use it in a way that invalidates the warranty.
One company printed a tongue-in-cheek limitation about their own lifetime guarantee for their rugged luggage and phone cases: “Does Not Cover Sharkbite, Bear Attack, or Children Under 5.”
Sometimes you have to jump through hoops to claim a money-back guarantee. You might have to return the unused product or prove that you used it before you can even request a guarantee. One skin product company required customers to send pictures of themselves taken with the product and a newspaper showing the date, one at the beginning of the 90-day-trial period and another at the end.
What’s a guarantee worth?
If the company making the guarantee has a solid track record, a guarantee is valuable! Guarantees give buyers confidence, reduce stress and provide assurance. They limit risk. And they help purchasers make decisions about who they can trust and where their money might be well spent.
Oddly enough, people usually put their money in places with few if any guarantees. And without guarantees, even the most trusted places to store our cash can let us down.
Mortgage bonds, previously thought of as reliable and boring, collapsed in the financial crisis. The housing market followed, with trillions of home equity lost. Muni-bonds, typically another safe haven for money, have been disrupted by bankruptcies. Enormous companies assumed to be stable drivers of the economy such as Enron and WorldCom collapsed with little warning. And the elite brokerage that performed so consistently turned out to be Ponzi scheme.
Some financial products do come with guarantees. Banks have FDIC insurance and CDs offer guaranteed rates, although the current anemic rates “guarantee” your savings will not keep pace with inflation.
Term life insurance provides a death benefit that is practically “guaranteed” not to be paid, since most term policies expire long before the insured does.
But there IS a place where your money can provide you true “lifetime guarantees.” Participating whole life insurance from a mutual life insurance company offers guarantees that should not be overlooked… especially if you’re not the type of person who likes to gamble with your dollars!
When you buy a whole life policy from a mutual life insurance company, you’re purchasing a financial product known for its guarantees:
A guaranteed death benefit. Since death is a “when” and not an “if” event, we think that’s a pretty important guarantee! Term life policies can be useful, especially to young families on a budget, but they are designed to be temporary policies, not permanent life insurance. They’re like appliance warranties – they assure you of temporary protection, but you’re not likely to need it while it’s in force. With whole life, as long as the premiums are paid, a legacy benefit is assured.
A guaranteed level premium. You premium will never go up with whole life insurance. Quotes for term life insurance increase dramatically as you age until they become cost-prohibitive. Premiums have risen on other types of permanent life insurance while policies were in force. However, your whole life policy premium will remain the same for life, or until the policy is paid up.
Guaranteed cash value. Whole life policies have a guaranteed cash value that is net of all costs (mortality costs, company expenses, agent commissions). Additionally, that guaranteed cash value is guaranteed to rise every single year even if no dividends are paid. Your gains are locked in, and unless you withdraw from it, your cash value will only ever go up.
If you ever have any questions regarding whole life insurance guarantees, be sure to contact me – Julie Ann Hepburn.
P.S. Part two is coming soon – (Why cash value can be guaranteed using whole life insurance)
Julie Ann Hepburn, National Private Client Group © Prosperity Economics Movement
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