1. Debunking The MythsAbout Whole Life Insurance:Taking a Fresh Lookat a Time-Tested Product

2. The economic downturn has forced many Americans to rethink the way they plan for theirfinancial future. In this more fiscally conservative environment, a growing number of consumersare returning to a financial product whose worth was recognized by their grandparents: wholelife insurance.Whole life insurance, which provides a broad range of financial benefits, has proved its long-term value over generations. While other financial instruments faltered recently, whole lifeinsurance provided small business owners with a much-needed source of funds and retirees withaccess to additional incomeall the while, continuing to pay death benefits to beneficiaries.For the last two decades, financial pundits and journalists have discounted the benefits of wholelife insurance in favor of trendy, equity-oriented vehicles that seemed to offer higher returns atlower costs, but in fact were high risk. Throughout this time, a number of myths about wholelife insurance have been perpetrated, with the result being that many Americans are unawareof the flipside of the storythe benefits that make whole life insurance one of the most valuableand flexible financial planning tools available. 3. Myth #1:You only benefit from whole lifewhen you die.Facts: Wrong! Mutual whole lifepolicyowners enjoy substantial livingbenefits during their lifetime ofcoverage:Myth #2: utual insurance company policyowners generally receiveM Whole life is a lousy placeannual dividends after the first policy year. For example,Guardian declared a dividend of $712 million at the end to put your money.of 2009 and has paid dividends on whole life policiesevery year since 1868. 1Facts: Um, No... 25-year Guardian policy begun in 1986 and trackedAthrough 2010 provided a 5.19% historic cash-on-cash he value of a whole life insurance policy is uncorrelated toTreturn, along with strong guarantees and low volatility. the stock market and is guaranteed by the insurer, so thatKeep in mind that past performance does not indicate death benefits and cash values are not affected by decliningfuture results.markets. Therefore, a whole life policy can serve as the stable component of an overall financial plan. ividends can be used to fund policy premiums or toDbuy more permanent increments of death benefit and he accumulated value in whole life insurance grows tax-Tcash value.deferred. Accumulated values on a policy may be withdrawn, ccess to the policys cash value is typically availableAup to the cost basis, tax-free. Any withdrawal in excess ofthrough withdrawals or tax-free loans. 2,3cost basis is taxed (this assumes the policy is not a Modified Endowment Contract which has different tax implications). 2,3 he cash value of the policy can be pledged as collateralTfor a tax-free loan. mall business owners may borrow against their policies toSprovide working capital. ealthy individuals use whole life in their estate planningWby setting up an insurance trust to pay estate taxes fromproceeds of the policy. 31Dividends are not guaranteed. They are declared annually by Guardians Board of Directors.2Policy benefits are reduced by outstanding policy loans or policy loan interest.3Guardian, its subsidiaries, agents or employees do not give tax or legal advice. 4. Myth #4:Whole life is too expensive.Facts: In considering whether to pur-chase whole life or to buy term andinvest the rest, you must take into ac-count not just the premium cost, but alsoMyth #3:the length of time you want coverage andOnce you retire, you should your ability to invest the rest profitably.cash your life insurance policy in. or longer periodsan entire lifetimewhole life insuranceFFacts: We hope not!is substantially less costly than a lifetime payout for term. If the need for life insurance is for less than 30 years, a term insurance policy is cheaper. hrough the loans and withdrawals available to whole lifeT erm insurance isnt designed for lifetime coverage. In fact,T policyowners, an individual can supplement retirement term insurance is prohibitively expensive to maintain for the income with tax-free funds. 2, 3, 4 average U.S. life expectancy of 78.9 yearsnever mind to aving whole life as part of a financial plan provides anHage 100. Term costs average a staggering 70% of the death additional level of security, financial freedom and a legacybenefit to life expectancy, or $700,000 per $1 million of for loved ones. death benefit, and more than 400% of the death benefit, or $4,000,000, to age 100 for a $1 million policy. 5 any people have estate liquidity problems that can onlyM be met through the availability of immediate cash. Heirs can hile term life is typically affordable during the primaryW use the proceeds of a whole life policy to pay estate taxes. 3premium guarantee period (5 to 30 years), annual premiums quickly escalate to an unaffordable degree once the hole life also provides a good source of tax-free funds forW guarantee period ends. big-ticket items that could put a dent in a tight retirement budgetsuch as a grandchilds college tuition or wedding. ith term insurance, the policyholder does not accumulateW any lasting cash value. At the expiration of the term of the ome families must establish special needs trusts toS insurance, the policyholder owns nothing, in contrast to provide financial care for certain family members, and life whole life insurance, where premiums build cash value that insurance is ideal for that purpose. belongs to the policyowner. amilies with real estate, closely held businesses, leveragedF hole life insurance provides a disciplined means ofW investments or margined stock portfoliosto name just accumulating cash values that are guaranteed (with respect a few categoriesoften use life insurance to offset the to the base policy) and subject to the declaration of significant cash liquidity demands on their estates. dividends for that complementary portion of a long-term odays healthy Baby Boomer couples haveonTpolicy values projection. To achieve returns equivalent to averageas much as a 30-year life expectancy (for at leastthose of a Guardian whole life policy in a 25-year policy one of them) past an age 65 retirement. study from 19862010, an individual investor would have to achieve returns in the apocryphal difference fund etirement is no longer the appropriate time to drop lifeR of at least 10% before-tax each and every yearover a insurancetoday its the time when many people realize long period of timea feat requiring serious investment the importance of buying it! acumen, as well as discipline.4Assumes the policy is not a Modified Endowment Contract (MEC).5Source: Life Insurance as an Asset Class: A Value-Added Component of an Asset Allocation 5. Myth #6:Once you buy life insurance youdont have to think about it again.Facts: Sticking the policy in the bottomof your file cabinet and never thinkingabout it again, isnt the best way toMyth #5:approach your life insurance purchase.All life insurance is created equal.Leave the set it and forget it tag lineto infomercialssit down with yourFacts: It just isnt the case.financial professionals at least on abi-annual basis to review your situation. he safety and security of your whole life policy dependsTon the insurer you purchase it from. It makes sense to buy conomic realities can affect your policies cash values. AsEwhole life from a well-established mutual carrier that hasyou review your other asset classes to check performance,decades of experience in the industry and maintains a highyou need to review this one.credit rating. ain reassurance of your life insurance portfolio. LifeG he four major mutual insurers, including Guardian, areT changes. Make sure your policy still fits. Whole life isat the very top of the financial rating spectrum. Their generally designed with the built-in flexibility to makeCOMDEXan arithmetic compilation of the fourmodifications.major rating agencies ratingsis 98 to 100 (With respect New family member?to these ratings, 85 is considered reasonably safe, 95 is New career?extremely safe.) New windfall? ne of the reasons the mutual companies are so highlyOrated is that they invest a high percentage of portfolio assets erforming due diligence is also criticalPin safe-haven government-guaranteed investments and Positive health changes can sometimes lower previousother high-quality fixed return instruments. In comparisonquoted premiumsto stock companies quarterly earnings pressure, mutual Policy with loans and withdrawals should be monitoredcompanies can take a long-term investment and Policies held in trusts need review, toomanagement view. erforming policy maintenance can help link your advisorsP hole life insurance policies can be customized with aWtogether. Strengthen their relationships around you. Crossvariety of riders or special features, such as a guaranteedcheck ideas between your investment, tax, estate, andinsurability rider or an accelerated benefit rider, that matchinsurance advisors.an individuals financial goals and protect from different risks. f course, if you purchased term insurance, discuss yourOoptions soon! When the term period runs out, premiumscan go way up 6. The Guardian Life Insurance Company of America 7 Hanover Square New York, NY 10004-4025 www.GuardianLife.comPub 4621 (09/10)20107277