19 Reasons Why Whole Life Insurance Is A Very Powerful Investment

    family at home

    Life insurance is a policy that enables the surviving members of a bereaved family to carry on with their lives without experiencing hardship after the death of the breadwinner. It can also help to protect the financial interests of a business if a key employee should die.

    What is Whole Life Insurance?

    Whole life insurance is the most common type of permanent life insurance policy. But contrary to what a lot of people think, it is not just for burial costs. Whole life is actually a solid asset that can help you become financially secure for the rest of your life, particularly if you take out the policy when you’re relatively young.

    A whole life insurance policy charges higher premiums than other kinds of life insurance primarily because it builds up a cash value on a tax-deferred basis, and some even pay its policy-holders a dividend. It is effectively a a long-term savings plan.

    There are lots of articles on the web that dismiss whole life as a bad investment. But here are 19 reasons why you should take out whole life insurance, especially when you’re young.

    1. It is a much more efficient way to save.

    A whole life insurance policy is not just for burial costs. It is a powerful savings vehicle that allows you to build wealth over the course of your life. Your premiums build up into a cash value at a savings rate that is higher than you’ll get from any bank.

    2. It builds a cash value that grows each year with interest, tax-deferred.

    Once a whole life policy builds up some cash value, its annual rate of return (AROR) never drops in value, and you can either use it directly in the form of a bank withdrawal or as collateral for a loan.

    3. The ROI (return-on-investment) is much higher than you’ll get from a bank.

    Putting money in a savings account rather than a life insurance policy means you’re missing out on up to 4% interest every year, which means thousands of dollars lost in your lifetime. The average rate of return on whole life cash value is almost always at least 3 or 4 percentage points higher than bank savings accounts and money markets accounts.

    4. It is a long-term investment.

    A whole life policy is effectively a long-term investment that provides a death benefit which offers substantial additional value to your beneficiaries over and above the cash value that you’ve built over time.

    5. Your premiums will never increase.

    With a whole life policy, your health at the time you bought the policy will determine the terms of your insurance policy. This means that your premiums will never increase based on changes to your health. So, if you took out your policy at 30 and develop health issues at 55 that you did not have when you took out the policy, your premiums will remain the same.

    6. You can access your accumulated cash value in your lifetime.

    You don’t have to die in order to get access to your accumulated cash value. You can use your cash value as collateral for a loan and pay it back with interest at a rate that’s a fraction of what you’ll pay for a bank loan. 

    7. You can do whatever you like with your accumulated cash value.

    There are no limitations on what you can do with your cash value. You can use it to start a business, send your children to college, as a downpayment for a house or any other purpose.

    8. Borrowing doesn’t affect your cash value.

    Borrowing against your insurance policy doesn’t decrease your policy’s cash value. It will continue to grow at the same rate, and your cash value will keep on building.

    9. Your cash value isn’t subject to market losses.

    Your cash value isn’t subject to market losses, as with other investment vehicles. As the 2008 crash showed, banks are less secure than traditionally thought due to their close ties to the real estate and stock markets. On the other hand, whole life insurance has no links to those markets.

    10. There are no penalties for accessing your accumulated cash value.

    Unlike other tax-favored investment products such as IRAs or 401(k) retirement plans, you are not penalized for accessing your accumulated cash value before you reach a certain age. You can also borrow against your money, tax-free.

    11. It provides peace of mind.

    The death benefit will provide surviving family members with funds they need no matter when you pass.

    12. It provides complete privacy for your money.

    Unlike the funds in your bank account, any growth on the cash value in your whole life insurance policy doesn’t get reported to the IRS or student aid applications and is completely protected from creditors in many states.

    13. It helps to build wealth over the long term.

    Whole life is a great way to build wealth over the long-term because the premiums you pay build cash value for you, and this money turns into savings over time.

    14. You can start out with cheaper premiums.

    Whole life premiums cost significantly more than term life for the same amount of coverage. However, if you cannot afford the premiums of a whole life insurance policy, you can start out with cheap term premiums, and convert to whole life when you have the financial means to do so.

    15. It is a guaranteed payment.

    As long as you are paying your premiums, the death benefit will never expire. It is guaranteed to be paid regardless of when you die.

    16. It offers scope for growth.

    The younger you were when your whole life insurance policy started and the longer you’ve held it since then, the larger it will grow.

    17. Your family is protected as soon as you make the first payment.

    After you make the first premium payment for your whole life policy, your net worth increases immediately and your loved ones are protected from that moment.

    18. You can earn dividends.

    Many insurance companies pay dividends in addition to the guaranteed cash value growth. You can take out those dividends as cash, use them to pay part of all of your premiums or reinvest them in the policies.

    19. It offers key tax advantages.

    The death benefit is tax-free, while the cash value growth is tax-deferred. This means you would only owe tax on the cash value if cancel the policy and take out the money. However, the money you’ve paid into your policy wil be tax-free.

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    Information Sources

    Trusted Choice

    AIG Direct

    All State


    State Farm


    New York Life