Why I Love My Whole Life Insurance Policy

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I usually get asked about the market or some stock, but if I am engaged in the conversation long enough I almost always get asked about whole life insurance. It usually starts off as, “My (brother-in-law, neighbor, college buddy — fill in the blank) keeps bugging me about this whole life insurance, what do you think? Should I buy it?” I love when people I just meet ask me this, as if I can crunch the numbers on the spot and do a full-blown analysis over a few cocktails.

What I usually tell them is something short and polite, like “it depends” or “there are pros and cons,” so as not to give unsuitable advice. But if they keep digging and are genuinely interested, I tell them upfront and honestly, that buying a whole life policy was one of the best financial planning decisions I ever made, and in fact I just bought more on my myself and my wife. In full disclosure, I am a financial planner licensed to sell insurance, however I sincerely believe in the product, having owned it myself.

What a Whole Life Policy Did for Me

Here’s what I tell them:

  1. Whole life forced me to save. I’ve owned my policy for about 10 years now, and the cash value (or equity inside the contract) is exactly what I put into the policy. Given all the demands on my cash flow with having three kids and running a business, I know how fast money can go. I am grateful to have this money saved.
  2. It gave me peace of mind. It’s comforting to know my kids will inherit something. I’ve seen fortunes made and lost, clients get laid off and health issues derail a career. It seems things never go as planned. I am grateful that no matter where my financial picture winds up — if I don’t save enough or if I use up my other money in retirement — as long as my premium is paid on the whole life insurance, the kids will get something. Mind you, it’s not a fortune, but it will help pay for a down payment on a house or their kids’ college bills. That’s peace of mind.
  3. Whole life will help me in the future. The equity in my whole life policy is mine to use at any age for any reason. I’ve seen clients use their policy as collateral on a business loan, while others use the cash value to supplement their retirement income. Recently, my wife and I bought a whole life policy that will allow us to use the death benefit for future long-term care costs. That again is peace of mind.

How Whole Life Policies Work

If I get asked how whole life policies work, I usually say a part of your annual premium is used to pay for the life insurance and rest is invested by the insurance company. The insurance company can refund a portion of your premium each year in the form of a dividend. Dividends are not guaranteed but can help in the buildup of the cash value. Cash value is the money inside the policy that is yours.

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