What does it mean that the policy is “engineered to increase in value every year.”?
Whole life contracts differ from other policies like Universal, Variable Universal and Indexed Universal that may appear to be whole life but were designed for limited term usage. Much like the flawed ‘buy term and invest the difference strategy’, these universal policies are specifically designed to get more expensive every year. Whole life on the other hand is permanent insurance which is designed to guarantee an increase in the basic cash value each year. In the early years of most policies, the cash value increase is minimal due to the structure of the policy issue process, the long-term cash accumulation strategy, and the commission program. To facilitate early banking, the initial policy should be specifically designed, or “engineered” to create cash value in the first year.
