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The whole Life Insurance Story

Whole Life is an insurance policy that provides lifetime insurance protection with significant guarantees and tax benefits for the policy owner.  These guarantees can be viewed as either rates or values.  When actuaries design a Whole Life policy, they begin by determining what rates are going to be guaranteed.  Once the guaranteed rates have been set, they are used to determine policy premiums and values.  Guaranteed rates and values are based upon conservative assumptions.  

A mutual life insurance company, such as Guardian, will then adjust the rates and values to current conditions through the mechanism of a non-guaranteed dividend.  Life insurance is viewed as a good thing for the benefit and welfare of society.  Therefore significant tax benefits have been given to it that are not found in other financial instruments.


A Whole Life Policy is built upon a foundation of three guaranteed rates:

  • The guaranteed mortality rate - this guarantee comes from the 1980 CSO table, a table of guaranteed mortality rates that are required by insurance regulation.

  • The guaranteed expense factor - an allocation for expense that is covered in guaranteed values.


The three guaranteed rates are combined in an actuarial formula that results in three guaranteed values: the premium, the death benefit and the cash value.  These three guaranteed features set Whole Life policies apart from all other types of financial instruments.  Whole life insurance has a:

  • Guaranteed Level Premium.- The annual premium is contractually guaranteed never to change.

  • Guaranteed Death Benefit.-  The level death benefit is contractually guaranteed never to go down.

  • Guaranteed Cash Value.-  The contractually guaranteed cash value grows each year until it is equal to the face amount of the policy at specified age, usually age 100.


Whole Life offers market rates of return in excess of its guarantees through dividends.  Dividends are paid to the policyholder because.

  • The insurance company's investment rate of return exceeds the guaranteed return promised in the policy.

  • Mortality experience is better than that which is guaranteed in the policy.

  • Expenses of policy administration are less than the cost guaranteed in the policy.

Guardian Dividend History


Policy Owners may choose from among several dividend options, but by far the most widely selected option is to have dividends purchase Paid Up Additions (PUAs)

  • The PUA option allows the policyholder to purchase additional guaranteed permanent paid-up participating insurance.  This option provides the policyholder with a growing cash value and death benefit that is guaranteed once purchased.


The contribution that life insurance makes to the welfare of society by providing protection for widows and orphans has resulted in it being vested with the following significant tax benefits:

  • Income tax free death benefits.

  • Tax-deferred build up of cash values inside of the life policy.

  • Access to policy values on a tax favored basis.


Whole Life Insurance offers a level of guaranteed permanence and stability unmatched by any other financial instrument in our highly uncertain and volatile world.


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Copyright 2001 Kaplan Management and Insurance Services

Last modified: Wednesday, January 23, 2019