The Whole Story On Whole Life

Federal employees may be disappointed that the monthly premiums they pay for their federal lift insurance will continually increase. Those looking for financial security without risk and without an increase in premiums have other options.



Bob Hill*


Many children’s fairy tales end with the famous phrase “…and they lived happily ever after.”

As you probably figured out years ago, life isn’t that simple or fair. This article isn’t a fairy tale; it is an article about permanent life insurance. Wait, don’t stop reading yet. I have something to share with you that I think you need to consider as you plan for your life ever after. There is a huge misunderstanding associated with this product called whole life insurance. Whole life isn’t the only insurance a person should consider or purchase. At the same time, it is incredibly flexible and deserves careful consideration by military professionals and federal employees interested in strengthening their family’s financial security. Let’s review the facts. 

There is a perception that permanent insurance is seldom purchased and not a mainstream financial product. This just isn’t the case. LIMRA, a research organization for the insurance industry, reported that annualized premiums from new coverage sales jumped 23 percent for whole life in the second quarter of 2010.

At the same time, term life experienced an 11 percent drop in annualized premiums, a 13 percent drop in face amount, and an 11 percent drop in the number of new policies sold. A recently-conducted survey by the First Command Financial Behaviors Index® revealed that two out of five middle-income Americans own some form of permanent life insurance coverage. Among those who don’t own a permanent life policy, one in four say they are likely to purchase this type of coverage in the future.  

So, more people are purchasing whole life. Does that mean that it’s the right type of coverage for you? Not necessarily. For some folks, term, or temporary, insurance fills their short-term need for protection. Each family’s situation is different, but the value and flexibility of whole life must be considered in any analysis. 

One strategy for meeting your short- and long-term needs includes employer-sponsored group term insurance in combination with a personal, whole life policy that is guaranteed to stay in force for your entire life, with a premium that never increases.

Feds are eligible for Federal Employee Group Life Insurance (FEGLI), while military professionals are covered with Service members’ Group Life Insurance (SGLI).

I meet with Federal employee and military clients weekly and consistently encourage them to take advantage of this employee benefit. But everyone will someday leave Federal service. Military pros will lose their SGLI, but have the opportunity to get Veterans Group Life Insurance (VGLI) through the Veterans Administration. This can be a good option if a person does not medically qualify for a commercial policy. Many people don’t realize, however, that premiums increase every five years, regardless of when you started your VGLI. That’s why permanent insurance that allows you to lock in your premiums should be in place or considered when planning for separation or retirement from the service. 

Federal employees who retire from government service can retain coverage, while individuals who leave active service prior to qualifying for an annuity cannot keep their FEGLI. My Federal clients are often amazed and disappointed that the monthly premiums that they’ll pay as retirees will continually increase. One potential solution is to buy whole life with premiums that never increase.

There are other reasons to consider making life insurance an integral part of a person’s comprehensive financial plan. Here are two that I think are worth your consideration.

Smart people have long realized that owning life insurance allows them to effectively leverage their money. A person can use pennies to buy dollars. In other words, a few dollars in premiums provides the insured with hundreds of thousands of dollars of protection. What other financial product can make the same claim? 

My experience is that clients like to focus on their investments, but that few want to take the time to review their insurance needs. But let’s face the facts. During the past couple of years, most investors have seen the value of their TSP shrink, and in some cases dramatically so. Now during this same time period, what happened to the value of their whole life policies? It’s remained impervious to market fluctuations and cash values have continued to grow. I don’t recommend life insurance to my clients as an investment, but the facts don’t lie. Folks looking for financial security without risk should consider whole life insurance. 

We have all enjoyed fairy tales; but even though we may outgrow our interest in children’s stories, we generally don’t outgrow our need for life insurance. And the flexibility, guarantees and value of whole life in a family’s financial plan can’t be overstated. We all want to make sure that our family’s story won’t turn into a horror story, and whole life coverage can help you author the kind of financial story that you want for yourself and your family. 


* Bob Hill is a Registered Principal and District Advisor at First Command Financial Services, Inc., in Arlington, Va.