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Life Insurance: Pros and Cons of Non-Guaranteed and Guaranteed

Fifty years ago almost every life insurance policies sold were guaranteed and offered by mutual fund companies. Choices were limited to either term or endowment or whole life. You paid a high set premium and the insurance company guaranteed the death benefit. All of that changed in the 1980s. Interest rates soared and policy owners surrendered their coverage to invest the cash value in higher interest-paying non-insurance products.

Life Insurance: Guaranteed vs. Non-Guaranteed Policies

In these days companies mostly offer a broad range of guaranteed and no guarantee life insurance policies. 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 rises then the insurer has to absorb the loss.
With a no guarantee policy the owner in exchange for a lower premium and possibly better return, is assuming much of the investment risk as well as giving the insurer the right to increase policy fees. If things don’t work out as planned then the policy owner has to absorb the cost and pay a higher premium.

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