Guardian Life Enhances Whole Life

New York-based mutual Guardian Life, seeking to inject more flexibility into whole life, has launched a new rider to make the products more affordable.

In addition, policy loan options will give policyholders more borrowing flexibility, the company said.

The rider and the loan options are available on policy forms L-95, L-99 and L-121, the company said in a product release.

“We want to create more flexibility and customization,” said Andrew Gordon, vice president and actuary for Life Product Development and Risk at Guardian Life, in an interview.

Lifetime Protection Builder rider offers decreasing term coverage for a 15-year period.

On the 5-, 10- and 15-year anniversary of the policy, term coverage drops by one-third in exchange for the opportunity to buy the same amount of death benefit coverage in a new whole life policy with no additional underwriting, the company said.

By exercising all three purchase opportunities, a policyholder starting out with $150,000 worth of term and $50,000 worth of additional whole life, will end up 20 years later with no term and $200,000 worth of whole life, the company said.

“You start with more term and end up with more whole life over time,” Gordon said.

Many term policies, which are affordable to young adults, offer policyholders to convert but by the time they are ready to do so ten or 15 years later, premiums will have doubled or tripled. The longer a policyholder waits to convert, the higher the premium.

The rider allowing for the transition from term to whole life incurs an additional premium and may not be available in all states, the company said.

With interest rates low, which diminishes the attractiveness of life insurance contracts, life insurance companies need to find ways to appeal to more people who say they want more choices and flexibility in insurance products.

A Choice of Interest Rates

Also available on policy forms L-95, L-99 and L-121, the company’s flagship whole life product line, policyholders will get to choose between a fixed-rate or a variable-rate loan as late as the 10th year of the policy, the company said.

Many whole life policies in the market lock policyholders into a rate at the time the policy is issued so that when it comes time to borrow, contract holders have no choice no matter what happens with interest rates.

“It’s a 10-year refinance built-in and provides a lot more options,” Gordon said.

Whole life offers the ability to borrow against the cash surrender value of the contact and the interest on the borrowed money is offset by dividends paid by the policy.

The company is offering a fixed loan rate of 6 percent guaranteed, dropping to 4 percent at the later of 20 years or age 65, the company said in its product announcement.

Variable loan rates are tied to Moody’s corporate bond yield average and the current loan rate is 4.5 percent, the company said.

The policy loans will be expanded to limited-pay policies L-20 and L-65 and to 10-day pay whole life later this year, Gordon said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.