As there are more variations and features of Whole Life Insurance, each variation will be discussed individually. This article explains Current Assumption Whole Life Insurance.
Current Assumption Whole Life Insurance is also known as Interest-Sensitive Whole Life, and offers a level premium that remains fixed for a period of time. At the end of the period, the premium amount (and possibly death benefit) will be reevaluated based on the policy’s cash value, which directly correlates with the insurer’s profitability (whether it collectively beat investment projections, and accurately assessed policy lapse rates and mortality rates).
Thus, if the insurance company exceeded expectations, premiums will likely decrease, whereas if the insurance did not meet expectations, premiums will increase. Under each scenario, the policy owner will have some decisions to make.
If premiums increase, the insured can (1) pay premiums at the same amount and lower the death benefit, (2) pay a higher premium to keep the same death benefit, or (3) sacrifice cash value (if available) and pay the same amount of premium.
On the other hand, if the insurance company performed better than expected, the insured could (1) (if still insurable) pay the same premium amount and increase the death benefit, (2) pay the same premium amount with the same death benefit, and increase the policy’s cash value, or (3) pay a lower premium.
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