Is A Whole Life Policy Ever A Good Investment? Doubtful!

Is A Whole Life Policy A Good Investment?

There’s a lot of conflicting information on life insurance. here's One of the most frequent questions agents encounter , "is a whole life policy a good investment?" The answer may surprise you and leave you just as confused.

The first thing insurance buyers need to understand is, “What is whole life?”

Life insurance markets used to be fairly simply. Today, however, insurance companies offer a wide range of products and policies tailored to individual needs and financial goals. Term life is a traditional life insurance product that has a defined period of validity — or term — during which a death benefit may be paid.

On the other hand, whole life policies generally refer to a group of products that pay a permanent death benefit, but also accrue cash value over time.

Whole life policies may earn interest, be diversified in portfolios, and have loan and early withdrawal options. They are often considered an investment product and a life insurance policy in one. Typically, they cost more than common term insurance and owners may choose to pay in additional funds up to a certain cap. But, is a whole life policy a good investment?  Based on the internal costs of these policies and the ultr-low investment returns assumed--NO, NEVER!

whole life insurance vs CD's or other alternative investments​​​​

Some financial planners compare whole life policies to traditional savings accounts with restrictions on withdrawals, money markets, or long-term CDs. While whole life policies earn interest, they do so at much lower rates than true investment products.

If you’re looking for a high rate of return, then a whole life policy would not be the best investment option. However, if you prefer long-term stability with a minimal return plus the added protection of a secure death benefit, then your whole life insurance policy may be a good choice.

If your primary concern is passing the investment on to beneficiaries, then a whole life policy has several advantages over savings accounts:

  • Growth is non-taxable
  • Interest generally accrues more quickly
  • Tax liabilities are reduced

Whether you’re starting a policy on payments, or have a sum to invest with beneficiaries in mind, then whole life can provide a moderate investment option against traditional savings and CDs. Again, is a whole life insurance policy a good investment? NO!  it's GREAT investment if you need the life insurance for LONG Time, but even then you need to look at your overall financial plan.

I Want to Use Whole Life as a Retirement Tool-But,is a whole life policy a good investment? 

Again, your primary goal will decide whether whole life can provide an effective investment for your financial needs. Many experts decry whole life as a true investment because of the high costs and lack of liquidity. However, if you’re young and have a steady career income, leveraging a whole life policy for retirement can be an effective strategy that pays off.

It can take twenty years for returns in a whole life policy to offset the front-end costs, so a person purchasing a policy at 35 could potentially reap the benefits during early retirement years. In such a circumstance, the policy could be considered a successful investment vehicle.

Whole life may also provide an option when the owner is already making maximum contributions to other retirement investments like an IRA or 401(k). On the down side, however, life insurance can have tax pitfalls and be costly without permanent income.

Make Whole Life Part of a Well-developed Investment Plan-- as an investment, whole life sucks!

Most financial planners and experts agree on one thing in relation to whole life plans: They can be a good investment when combined with other financial products.

Solid financial planning begins with incorporating a wide range of products and investments in your portfolio. When whole life policies are added to stocks, retirement accounts, savings, and other investments, they account for the strongest long-term strategy and still provide a reliable death benefit.

If you’re considering a whole life policy as an investment strategy, do your research and speak to an agent. Like any financial product, there is no simple answer and whether it turns out to be a good investment depends on your individual needs and situation. In the end, only you can answer this question--"is a whole life policy a good investment?".  Don't let the agent convince you it is until you've done extensive research and understand your own reasons why you would consider this type of life insurance policy!  Also, make sure you know how much life insurance you actually need.  Start there and the numbers will surprise you!

is whole life a good investment

If you need an insurance professional who knows the industry, listens to your needs and works hard for you, Chris is your man.

If you need an insurance professional who knows the industry, listens to your needs and works hard for you, Chris is your man.

We have trusted Chris with all our insurance needs for several years. He always listens and understands our needs completely and then works hard to design a policy that best fits our needs. He is very personable and easy to work with.

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Chris Acker, CLU, ChFC

Chris is an independent life insurance broker located in Palo Alto, Ca. He started helping families and businesses build strong financial safety net in 1985. He earned a BA in history from Williams College in 1985. He Earned the CLU designation in 1989 and the ChFC designation in 1991. He is a past board member of the local chapter of the Society of Financial Services Professional. He has been a member of the National Association of Insurance and Financial Advisors since 1985. Chris resides in Palo Alto with his wife, Carol and daughters Rachael and Samantha. In his spare time he is a regular platelet donor for the Stanford Blood Center and actively volunteers for various organizations and alumni groups.