23 Jan Are guaranteed life insurance products really guaranteed?

Q. I need life insurance and I want a permanent policy. I see ones with guaranteed premiums, but with costs everywhere going up for inflation, I’m not positive it will really be a guaranteed price. What fine print should I look for, and is there any reason a company can charge more over time when a premium is supposed to be guaranteed?
— Concerned

A. Yours is a great question.

It’s all about the fine print.

“Unfortunately, life insurance is sometimes marketed as `permanent’ when that could depend on dividends or interest rates,” said Ed Gaelick, a Chartered Life Underwriter and Chartered Financial Consultant with PSI Consultants in Glen Rock.  “So it is critical that you do review this with your insurance advisor and/or read the fine print.”

As for the word “guaranteed,” a policy is a contract and if it says premiums are guaranteed, they are guaranteed, Gaelick said.

“Your concern is more `pre’ sale so sales illustrations and marketing materials would provide you with that information and need to be read carefully,” he said.

Gaelick noted the type of life insurance you purchase can have some “implied” features.

He said a pure whole life product would have guaranteed premiums as well as a guaranteed component of the cash accumulation. However, there are “modified” whole life products that may guarantee certain values but only up to a certain age or years so again, reading the fine print is important, he said.

“Certain life policies such as universal life, variable life, adjustable/flexible life have interest and/or market risk and those policies being `permanent’ absolutely are contingent on returns,” he said. “So as Sy Syms, founder of SYMS men’s clothing said…. `an educated consumer is our best customer.’”

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This story was originally published in January 2024.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.