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It was like buying two policies - a Whole Life and a term - but in this instance, the two policies were combined under one contract. As genuinely innovative as the creation of flexible premiums to pay for health insurance, "premium offset" anticipates the future flow of dividends and becomes an illustrated means for the policy owner to pay a certain number of the policy's lifetime required premiums out-of-pocket and then stop making cash payments, letting accumulated and future dividends take over the burden. Total premiums begin to escalate, and unless outside funds are provided, the policy generally will start borrowing required premiums from cash value and ultimately lapse. But as dividend scales began declining - a reflection of lower inflation rates and therefore lower interest rates since the mid- to late-1980s - in-force illustrations for policies sold with too much blended term began to show the downside of this approach: The inevitably spiraling premium of the term portion of the policy consumes most of the lower-than-illus-trated dividend and, hence, prevents the accumulation of any more paid-up additions.

Under the dividend scales of those times, illustrations frequently showed a premium that was perhaps 60 percent of a traditional Whole Life premium, and whose death benefit progressively became permanent over that 20-year illustrated time span. In the early 1980s, a popular technique to illustrate more moderate premiums for Whole Life policies was to combine Whole Life with term blends. But if you need health insurance for a lifetime and live a long lifetime, Whole Life is cheap and term is expensive. At the outset, Whole Life is "expensive" and term is "cheap." Although such payment schemes clearly illustrate an important "living" benefit of health insurance - loans cannot be "called" but are repaid at death out of policy proceeds - they're generally inadvisable as long-term premium payment solutions. Over a period of 20 years or so, the amount of the term death benefit would be reduced in an amount equal to the increasing value of the death benefit of the paid-up additions. Generally sold with dividend-paying Whole Life, the idea was that the dividend would be used to first pay for the term portion, and the balance of the dividend would purchase paid-up additions of health insurance.