Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
Whole life insurance has many advantages to it. The first being that your premiums are fixed and guaranteed for the rest of your life and as a permanent insurance program, it builds cash value over time.
If it's a participating whole life policy, any dividends that are paid out can be used to either increase the death benefit via paid up additions, reduce your premium, or make a payment to you directly (options depend on which carriers whole life policy you have). If you use the dividends to reduce the premium, the policy can become self-sustaining after a number of years - meaning no more premium payments. Non-participating policies only build cash value - these types of plans do not pay out dividends.
If you're buying whole life coverage when you're young and its cash value builds for years and years, it can create a nice nest egg for funds that can be used during your retirement years. It's important to remember that if you borrow from an insurance policy, you're creating a loan as the monies are expected to be paid back. If you cash out the policy, you lose the life insurance coverage.
An alternative for those who are not very concerned about the cash value and want to maximize the death benefit of your life insurance, you may want to consider a guaranteed universal life policy instead of whole life. GULs can offer a larger amount of coverage than whole life policies for the same premium or save you a ton of money on your premiums for a given level of coverage.
Make sure to consult with an experienced life insurance broker who can create a structure that will best serve your needs, goals, and budget.
I hope the information is helpful - please feel free to contact me for help and if you have any other questions. Thanks very much.
That is a great question! I think it's important to be clear about the difference between an investment and the protection that life insurance provides. An investment is something that is designed to hopefully increase in value over time, and provide you with an increase over what was invested. Stocks, money markets, mutual funds, bonds, these are investment vehicles. Life insurance typically doesn't provide that same result. Term life has no value unless you die while it is in force, and you wouldn't be able to use any of those funds either way. Whole life insurance pays out when you pass, and the amount is promised when you purchase the policy. Though there are some companies that will pay dividends, these are rare, and most policies will only pay out what your face value is ( and again, that is of no value to you). It is a great way to protect against estate taxes, provide an income to those you love and leave behind, and for covering expenses that might outlive you. Life insurance is a worthy investment in that sense. I hope that helps, thanks for asking!
Agent Owner, Gilmore Insurance Services, Marysville, Washington State
Why invest in whole life insurance? Well it is one of the few insurance products that you actually control, not the insurance carrier. That is a big reason why whole life insurance is expensive compared to other life products. The insurance company bears the risk of the contract as they cannot alter or change the terms of the contract, they cannot raise the price of the policy in later years and must receive the policy owners permission to do anything to the policy. What a whole life offers is a decent return for the safety it provides the policy holder. There is very little investment risk to a whole life policy compared to other places where a person can put money. This also is reflected in the return.
If you had money invested in 2008 you learned first hand about investment risk. That said, while the rest of my investments were losing 40% my whole life gained value. You can't go backwards with a whole life which makes it a good part of anybody's planning. I call whole life the most boring investment a person can make. Why? it does what it says it will do.
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If it's a participating whole life policy, any dividends that are paid out can be used to either increase the death benefit via paid up additions, reduce your premium, or make a payment to you directly (options depend on which carriers whole life policy you have). If you use the dividends to reduce the premium, the policy can become self-sustaining after a number of years - meaning no more premium payments. Non-participating policies only build cash value - these types of plans do not pay out dividends.
If you're buying whole life coverage when you're young and its cash value builds for years and years, it can create a nice nest egg for funds that can be used during your retirement years. It's important to remember that if you borrow from an insurance policy, you're creating a loan as the monies are expected to be paid back. If you cash out the policy, you lose the life insurance coverage.
An alternative for those who are not very concerned about the cash value and want to maximize the death benefit of your life insurance, you may want to consider a guaranteed universal life policy instead of whole life. GULs can offer a larger amount of coverage than whole life policies for the same premium or save you a ton of money on your premiums for a given level of coverage.
Make sure to consult with an experienced life insurance broker who can create a structure that will best serve your needs, goals, and budget.
I hope the information is helpful - please feel free to contact me for help and if you have any other questions. Thanks very much.
If you had money invested in 2008 you learned first hand about investment risk. That said, while the rest of my investments were losing 40% my whole life gained value. You can't go backwards with a whole life which makes it a good part of anybody's planning. I call whole life the most boring investment a person can make. Why? it does what it says it will do.