Guaranteed vs. Non-Guaranteed Permanent Life Insurance Policies

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Five decades ago, most life methods sold were guaranteed and offered by mutual fund companies. Choices were limited to term, endowment or life insurance coverage policies. It was simple, you paid a high, set premium and the actual company guaranteed the death benefit. All of that changed in the 1980's. Interest rates soared, and policy owners surrendered their coverage to speculate the cash value in higher interest paying non-insurance products. To compete, insurers began offering interest-sensitive non-guaranteed policies.

Guaranteed versus Non-Guaranteed Policies
Today, companies have a broad range of guaranteed and non-guaranteed life insurance regulations. A guaranteed policy is one out of which the insurer assumes all the risk and contractually guarantees the death benefit in exchange to enjoy 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 for the investment risk too as giving the insurer the to increase policy liabilities. If things don’t work out as planned, the life insurance policy owner has to soak up the cost and pay a higher premium.

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