Question: When my life insurance agent sold me a policy many years ago, I understood it to be whole life. The premiums were level for a long time, and it has cash value. Now, I am in my late 60s and the premium is fluctuating. Can whole life premiums fluctuate? Submitted by Anonymous in Kentucky

Answer: There is type of life insurance known as Interest-Sensitive whole life. This policy begins with a guarantee of level premiums for a fixed number of years. Commonly, the initial premium is less than standard whole life. After the fixed term of years, the cost of insurance is redetermined at certain intervals, such as once a year or once every 5 years. Interest-Sensitive whole life is especially affected by interest rate changes. If the cost of insurance rises or interest rates fall, your premium will increase. You do have the option of paying the original premium, however, your death benefit or cash value will be reduced. To maintain the original death benefit and continue building cash value you must pay the new premium. Unfortunately, many variable life insurance policies have been experiencing problems with the prolonged period of low interest rates. The policies were written because at the time they were inexpensive, and historically low interest rates were unforeseen. If interest rates begin to rise, your premium should reduce at the next redetermination interval.



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    Climbing the Money Tree


    R. Joseph Ritter, Jr. CFP® is a CERTIFIED FINANCIAL PLANNER(TM) and founder of Zacchaeus Financial Counseling, Inc., a non-profit organization providing financial planning services to low-income households and households experiencing financial strain.

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