1. It can help with estate taxes. As of 2014, married couples can pass on up to $10.68 million to their heirs without any estate taxes due (there are some nuances, but they’re besides the point here). An individual can pass on $5.34 million estate tax-free. For people who will be passing on more that those amounts, they could be facing significant estate taxes that would leave their heirs with less money. Permanent life insurance can be a good way to provide the funds to pay those taxes and allow their heirs to receive the full amount of the inheritance.
The information on this site is general in nature. Any description of coverage is necessarily simplified. Whether a particular loss is covered depends on the specific facts and the provisions, exclusions and limits of the actual policy. Nothing on this site alters the terms or conditions of any of our policies. You should read the policy for a complete description of coverage. Coverage options, limits, discounts, deductibles and other features are subject to individuals meeting our underwriting criteria and state availability. Not all features available in all states. Discounts may not apply to all coverages and/or vehicles. 
With that out of the way, I’ll point out that I would not even consider selling my best friend whole life. It’s a rip-off in his hands and I value my friendships too strongly to alienate those I love by selling them whole life. I would however sell it to my wife! Why is that? Well, because the commissions on these policies are HUGE. Between the First Year Commission and the override, if I buy the policy for myself or my wife and just roll the commission into additional whole life, it begins to look attractive. That compounding makes it attractive for insurance salespeople in a way that is simply not available for the average consumer. So when your insurance guy says “oh yeah, I own this policy” it’s probably true…but the value proposition is very different for each of you. Beyond this particular case, I’m not a fan of whole life in just about any situation. Go figure then that half the people who attend the Million Dollar Round Table conferences generally sell a lot of this crap. Take from that what you will…
At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +25.28% per year. These returns cover a period from January 1, 1988 through February 4, 2019. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.
The upshot is that the taxation of a 401(k)/Traditional IRA down the line is often beneficial to being taxed up front. Certainly not always, but often. And in any case, I would challenge you to find a financial planner who does not make money off the sale of whole life insurance who would recommend it as an investment tool before you have maxed out your dedicated retirement accounts.
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Hi Matt, Enjoyed the article. I agree with a lot of what I have seen up here, both by you and other commenters. I believe that a lot of the typical Dave Ramsey advice applies to the vast majority of the population, who can’t afford to pay $500 month premiums w/$500 month overfunds. Yeah, if you’re in a position where that amount is no more than 20% of your savings, wow & congrats, and it could possibly be a good idea. But that’s like 50% of mine. As someone who is new to investing and just a year out of school, I recently sat down with a guy from one of the more respectable companies in the WLI market. I truly believe it would have been a good deal for a very select group of individuals, but for me, there were two main turn-offs. First, I simply couldn’t commit to send such a large portion of my savings for the next 10, 20, or 30 years. But secondly, I just didn’t fully understand the policy. From other comments, I think others are in the same boat. These things are confusing, I asked lots of questions but still it just didn’t make sense what was going on with every level. I’ve done my research on saving/investing, and gotten a pretty good grasp so far of my strategy, but my mind still just hasn’t fully grasped WLI. So I backed off. And I’d encourage everyone to do the same – if you don’t know exactly what it is that you’re doing and can’t understand or explain it, then don’t get in to it.
Burial insurance is a very old type of life insurance which is paid out upon death to cover final expenses, such as the cost of a funeral. The Greeks and Romans introduced burial insurance c. 600 CE when they organized guilds called "benevolent societies" which cared for the surviving families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose, as did friendly societies during Victorian times.

I recently reviewed my mother’s life insurance policy. Someone sold her a whole life policy with a 35K death benefit for $197.00 per month. She was 71 years old when she bought it! She brought it to my attention last month after being diagnosed with lung cancer, explaining she could no longer afford the payments. She requested I review/change the policy to pay less so she would have lower payments. Of course, no one will insure her now! My mother does not have a lot of money and I think the guy that sold it to her is a jerk as she already had a term policy – which she cancelled after buying this one. Is there an ethical recourse?
2. For people who have already maxed out all of their tax-deferred space and have a sizable investment portfolio built up, permanent insurance can potentially offer some diversification along with some benefits of tax-deferral. These people could invest in a permanent insurance product specifically designed to maximize the investment opportunity, which would include significant up-front contributions and a few other bells and whistles. These are not the run-of-the-mill whole life insurance policies sold by your local agent, and they are generally not right for people who don’t already have significant wealth.
You will find independent insurance agents represent many of the same insurance companies offered by local insurance agents.  The biggest benefit is the time savings individuals and business will find.  Because the selection of insurance companies for personal, commercial and life insurance is so comprehensive you don't have to contact several agents for quotes.  An independent insurance agent may represent 5 to 10 insurance companies. 
Although some aspects of the application process (such as underwriting and insurable interest provisions) make it difficult, life insurance policies have been used to facilitate exploitation and fraud. In the case of life insurance, there is a possible motive to purchase a life insurance policy, particularly if the face value is substantial, and then murder the insured. Usually, the larger the claim, and the more serious the incident, the larger and more intense the ensuing investigation, consisting of police and insurer investigators.[30]
I’ll start with the whole life policy a financial planner is currently trying to sell me on. It does seem to be too good to be true, so I’m trying to figure out what’s wrong with it. He claims that I put $1k in it each month for 20 years. At around the 10 year mark, the “cash value” meets the amount of money I’ve put into it, and begins to exceed it. After 20 years, I’ve put $240k in, and it’s worth around $550k. That’s the amount I could take out if I wanted to close the thing. And I *believe* he said that’s tax free, but maybe I’m wrong about that… he also may have said something about instead withdrawing a set amount of around $55k each year and that’s tax free? Not sure. But just looking at these numbers and ignoring the death benefit, is that not a good investment? I’ve been maxing out my 401k and investing in mutual funds for more than 10 years and I’d estimate for every dollar I’ve put in, I now have about $1.20. I’m sure some of that has been poor allocation of funds, but even taking that into consideration, it seems pretty pathetic compared to the option of more than doubling my money in 20 years (looking at the $550k out with $240k in). What am I missing?
I wish I could give you direct feedback but it’s really impossible to say Steve. It depends on your specific situation, your goals, and also the state of the policies as they exist now. Evaluating an in-force policy is different than evaluating a yet-to-be-purchased policy, and even a bad policy can perform reasonably well going forward once it’s been in place for a number of years. If you’d like an objective analysis, I would suggest reaching out to a fee-only financial planner. Given that you’re closer to retirement than my typical client, I would try to find one through NAPFA or Garrett Planning Network.

Death benefits are generally received income tax-free by your beneficiaries. In the case of permanent life insurance policies, cash values accumulate on an income tax-deferred basis. That means you would not have to pay income tax on any of the policy’s earnings as long as the policy remains in effect. In addition, most policy loans and withdrawals are not taxable (although withdrawals and loans will reduce the cash value and death benefit).2

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^ Anzovin, Steven, Famous First Facts 2000, item # 2422, H. W. Wilson Company, ISBN 0-8242-0958-3 p. 121 The first life insurance company known of record was founded in 1706 by the Bishop of Oxford and the financier Thomas Allen in London, England. The company, called the Amicable Society for a Perpetual Assurance Office, collected annual premiums from policyholders and paid the nominees of deceased members from a common fund.
Defense Base Act (DBA) insurance provides coverage for civilian workers hired by the government to perform contracts outside the United States and Canada. DBA is required for all U.S. citizens, U.S. residents, U.S. Green Card holders, and all employees or subcontractors hired on overseas government contracts. Depending on the country, foreign nationals must also be covered under DBA. This coverage typically includes expenses related to medical treatment and loss of wages, as well as disability and death benefits.
First, a term life insurance policy will cost much less than a whole life insurance policy with the same death benefit, often around 12 times less. So your example of a $30,000 whole life policy with a $20 premium compared to a $30,000 term life policy with that same $20 premium is not a valid comparison. The term life premium would be a fraction of the whole life premium. 

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I have a few whole life policies. I was older when I really started to save and have the ability to pay into these accounts now (one I paid $95,000 right at start) and started late on a 401K. I max out my 401K contributions every year (I’m in the 50+ catch up department) so I believe the thinking was that these policies were the best option given my late start. Is that true? It seems your article is geared toward the young investor. 
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I have a Dividend Option Term Rider that will expire soon. I am 57 years old. New York life wrote to me stating I can change over to whole life insurance without having to answer health questions or take a physical exam. What are the advantages or disadvantages of this for someone of my age? I currently have a 401K. Would my money be better invested in that or elsewhere? Thanks.

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