There seems to be an eternal debate that persists regarding whole life insurance and universal life insurance. Agents, insurance companies and some consumers that sit on either site of the argument will swear that one is definitely better than the other.
In our experience, most whole life insurance hacks will point at poorly designed universal life insurance policies that were sold in the 1980's as an example of why the product (UL) doesn't work. They will claim that the policies will leave people needing to make large additional premium payments as they age to keep the policies in force.
In some cases there have certainly been problems with older universal life insurance policies, however, it is not an inherent problem with the product–it is a problem of poor design and less than poor policy management.
On the other hand, the universal life insurance hacks will point out all sorts of reasons why whole life insurance is an old stodgy product that will never perform as well as universal life insurance. Additionally, the criticism most often hurled against whole life insurance is that it lacks flexibility. We can and do prove those criticisms wrong on a regular basis.
In our opinion, this is a non-sensical debate. One product is not “better” than the other.
More often than not, the problem with both sides of the debate is that neither fully understands how their own product works and they certainly don't understand the mechanics of the product they rail against.
Let us just say this now–explicitly.
There is no better.
Now, there are certainly times when one (either WL or UL) is better based on facts. But there is not ONE solution that will always be best in every circumstance.
We have to look at the numbers.
Of course we've been doing this long enough that we will often form an opinion early on (based on our conversation with a new client) as to which product will likely work best for them and their given set of circumstances. But we always have to look at the numbers.
There will likely be other questions that come to you has we work through that process that you are not thinking of in the beginning. Our process really encourages that evolution of thought as people begin to really understand what we are showing them and begin to grasp the power that both whole life insurance and universal life insurance possess.
Many times there are things that will come up in going through this process that will often times make the selection of one product or the other crystal clear to the client. In other words, one will stand out to them as clearly being the better option.
But there are those people who want to make a debate out of this and they like to use words like–always.
The Whole Life Insurance Hacks
It comes from both sides but the more egregious desk-banging and chest-thumping seems to come from the whole life insurance side of the table. Probably because they have books to sell and there are a conglomeration of people all saying the same thing in different ways when it comes to whole life insurance.
They want to suggest that whole life is always the better option because it has superior guarantees and contractual elements that make it more favorable. Of course, when we look at their argument, we think that they are pointing out things that have no basis in a comparison for using cash value life insurance as an asset class.
The truth is that those aspects to the contract are only relevant to the death benefit which is largely unimportant when designing a life insurance policy to optimize its cash value.
When we tweak whole life insurance, we have essentially mimicked a universal life insurance contract. Gasp!!
[00:09:20] Brandon gives full explanation of what it means to blend a whole life insurance contract.
So Is Universal Life Insurance Better?
No, not by a long shot.
Listen to the full episode to hear our full commentary on this “debate”.