I'll start out by saying that the best life insurance is the life insurance that is the right amount for your needs and is affordable to you. For the most part, it doesn't matter whether it's whole life, term life, or some combination of the two.
Whole life is good for a number of reasons:
It's the best way to cover a permanent need - The dividends and cash value build over time and, over a long period of time, the cash value may be more than the premiums you've paid essentially making it free or better.
Premiums are level - the premium you pay when you first get your whole life will be the same for your lifetime. It won't increase and, as long as you pay that premium, you'll always have the policy.
It's flexible - the cash value in your policy is yours and you can do with it what you'd like. You can take a loan of your cash value or take part of it out if you need to. But, be aware this may affect your future premiums or the death benefit.
The cash value grows tax deferred - You don't get a 1099 for the gain in your policy. You only pay income tax on the gain when you make a withdrawal.
The gain in the cash value comes out last - When you make a withdrawal from your policy, your paid premiums come out first and, since you already paid tax on that money(usually), you don't owe any income tax until you've withdrawn all your premiums.
A couple of qualifiers. My statements apply to the usual scenarios where you pay your premiums from your net income. If there is an arrangement where the premiums are deducted from your income tax, all withdrawals may be taxable. Also, the death benefit may become taxable to the beneficiary. These are higher level arrangements that would take a lot longer to explain.
Bottom line, whole life insurance is good because it does things that no other life insurance program can. Used for the correct situation, it's the best at what it does. Find a good agent that will take the time to evaluate what you need and build a program that covers what you need at a price you can afford. The best life insurance is the insurance you have in force. If you can't afford it and let it lapse, it doesn't do anything. Trust your agent and listen to their advice.
Insurance Advisor, Lordship Insurance Services, California
There are many people who have a problem with Whole Life Insurance. However, under the right circumstances, it is best for many different circumstances. It is permanent insurance that will last for the whole life of the insured. It will build cash value and has options available such as; being able to get paid up insurance, being able to take out policy loans, being able to get a waiver of premium rider (just to name a few). Talk to an Insurance Advisor and explore whether or not you could benefit from this type of insurance.
Agent Owner, Gilmore Insurance Services, Marysville, Washington State
Why is whole life good? Well there have been several answers that will cover the bases pretty well. A locked in premium, tax deferred growth, a death benefit that grows over time, etc..
Let me give you another reason. a reason that you may not realize until later in life if something happens to you but doesn't kill you. That's right people get sick. Diabetes, high blood pressure, heart problems and so on can and actually do happen to a large segment of our population. The reason I want to point out pertains to the things I just mentioned. Why is whole life good? Because they can't take it away from you. YOU control the policy. The price can't go up, the policy can't really run out of years and end prematurely. Why is that important? When I got sick with my type II, hyper tension and recently AFIB, what a reassurance it was to KNOW I was still in control of my policies, that they weren't going to end or explode in price on me. Whole life is expensive because it's a product the INSURED controls. Cheers.
Insurance Adviser - Broker, SC Insurance Services, Oahu, Hawaii
Why is Whole Life insurance good? Ah - where to begin? There are so many good things about Whole Life! I like the points Larry made above here, and the points that DM Rozek made. So rather than restate those points I'll start by saying that your best Whole Life policies are with the strongest, oldest, Mutual insurance companies that pay dividends to the policy holders. There is no cash value at all with Term insurance so that's a definite advantage of Whole Life.
Beyond the other points mentioned above by the other contributors, what I like to help my clients understand is the "infinite banking" uses, or the "interest arbitrage" strategies that Whole Life insurance makes possible. The cash value of Whole Life is a liquid asset that can be used without incurring a taxable event by means of a policy loan. The interest on policy loans is almost always lower than the interest and dividends paid into policy cash value. And when you have a policy with a mutual company that offers non-direct recognition loans your cash value continues to accumulate compounded as though the loan was never taken. And when borrowing from your cash value yo aren't locked into a repayment schedule as you are with a bank.
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Whole life is good for a number of reasons:
It's the best way to cover a permanent need - The dividends and cash value build over time and, over a long period of time, the cash value may be more than the premiums you've paid essentially making it free or better.
Premiums are level - the premium you pay when you first get your whole life will be the same for your lifetime. It won't increase and, as long as you pay that premium, you'll always have the policy.
It's flexible - the cash value in your policy is yours and you can do with it what you'd like. You can take a loan of your cash value or take part of it out if you need to. But, be aware this may affect your future premiums or the death benefit.
The cash value grows tax deferred - You don't get a 1099 for the gain in your policy. You only pay income tax on the gain when you make a withdrawal.
The gain in the cash value comes out last - When you make a withdrawal from your policy, your paid premiums come out first and, since you already paid tax on that money(usually), you don't owe any income tax until you've withdrawn all your premiums.
A couple of qualifiers. My statements apply to the usual scenarios where you pay your premiums from your net income. If there is an arrangement where the premiums are deducted from your income tax, all withdrawals may be taxable. Also, the death benefit may become taxable to the beneficiary. These are higher level arrangements that would take a lot longer to explain.
Bottom line, whole life insurance is good because it does things that no other life insurance program can. Used for the correct situation, it's the best at what it does. Find a good agent that will take the time to evaluate what you need and build a program that covers what you need at a price you can afford. The best life insurance is the insurance you have in force. If you can't afford it and let it lapse, it doesn't do anything. Trust your agent and listen to their advice.
Let me give you another reason. a reason that you may not realize until later in life if something happens to you but doesn't kill you. That's right people get sick. Diabetes, high blood pressure, heart problems and so on can and actually do happen to a large segment of our population. The reason I want to point out pertains to the things I just mentioned. Why is whole life good? Because they can't take it away from you. YOU control the policy. The price can't go up, the policy can't really run out of years and end prematurely. Why is that important? When I got sick with my type II, hyper tension and recently AFIB, what a reassurance it was to KNOW I was still in control of my policies, that they weren't going to end or explode in price on me. Whole life is expensive because it's a product the INSURED controls. Cheers.
Beyond the other points mentioned above by the other contributors, what I like to help my clients understand is the "infinite banking" uses, or the "interest arbitrage" strategies that Whole Life insurance makes possible. The cash value of Whole Life is a liquid asset that can be used without incurring a taxable event by means of a policy loan. The interest on policy loans is almost always lower than the interest and dividends paid into policy cash value. And when you have a policy with a mutual company that offers non-direct recognition loans your cash value continues to accumulate compounded as though the loan was never taken. And when borrowing from your cash value yo aren't locked into a repayment schedule as you are with a bank.