Guaranteed vs. Non-Guaranteed Permanent Life Insurance Policies

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5o years ago, most life insurance policies sold were guaranteed and offered by mutual fund companies. Choices were in order to term, endowment or very existence policies. It was simple, you paid a high, set premium and the insurer guaranteed the death experience some benefits. All of that changed in the 1980s. Rates of interest 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 access to a broad range of guaranteed and non-guaranteed life insurance rules. 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 must absorb the failures. With a non-guaranteed policy the owner, so they could earn a lower premium and possibly better return, is assuming much of an investment risk as well as giving the insurer the to increase policy price. If things don’t work out as planned, the policy owner has to absorb the cost and pay a higher premium.

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