re: Whole Life Policy: Good Investment?

If you correctly setup a policy, a whole life insurance policy can act as a vehicle for investments, but shouldn't be viewed as an investment on its own. You need to create a ratio of about 85/15 paid up additions to whole life premium.

If you do this your cash value will match your cash outflow by around year 5. If you use Mass Mutual you can net a 6% annual return while being able to borrow against the cash value of the policy at 5%

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Finally, someone with some sense! Up until recently, you could borrow against the policy for much less. So you were guaranteed 6-8% on your cash, then could loan against it and arbitrage the different in the market. Dave Ramsey doesn't cover that.

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Dave Ramsey isn't for people who know how to arbitrage. He has his place amongst certain levels of the population who shouldn't be borrowing money and investing into anything except S&P 500.

Why should it take the place of a term policy?

I’m 60. But I don’t think age answers the question correctly for all people, perhaps.

Absolutely not. It’s a scam sales pitch. Young “financial advisors” are selling it bc they can’t get a job as an actual financial advisor, companies can only hire them when they’re making money off a product

Another pro is, depending on the state, it may be protected from creditors. I have several friends who sold businesses and properties and put a lot of the proceeds in to whole life as a sort of safe harbor.

Because if you live long enough your term insurance will expire at some point.

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Always? If you can afford Whole Life now, you can save yourself money in the long run due to tax advantages.

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Yes, you’ll always come out ahead by investing in a product that’s designed to make you money instead of the insurance company. Let’s suppose you do purchase a shite ton of whole life coverage…

Eventually, one day many years from now, you’ll actually have more money in cash value than what you paid into it.

Ok, great! Now you’ve “created your very own bank”, right? Sure, if you think of it that way. So now you borrow some money from it. FREE MONEY!! No need to pay it back because it’s your own money, right? Nope! It’s the insurance company’s money. You borrow it and don’t pay it back and you’re gonna have 5-8% or more interest accrue and add to the loan balance.

Two scenarios:

You either eventually pay it back plus the interest or you don’t pay it back. If you don’t pay it back, it will eventually build up to a higher amount than the cash value. If that happens, the policy is done.

Let’s say you do pay it back. Ok, so you just paid wayyyyyy more for your life insurance than you needed to AND paid 5-8% interest on the only benefit of paying more in the first place - cash value living benefits.

Let’s say you never pay it back and let the policy cancel. If the amount of the loan plus interest at the time of cancellation is higher than what you paid into it, you created a taxable event for yourself. Again, you paid wayyy more than you had to for life insurance, utilized the living benefits, and now you don’t have a policy to show for it AND you owe taxes now.



Yes, it’s always better to buy term and put the rest of your money into an actual investment product. That said, it’s not a terrible idea to have a small amount of whole life coverage to pay for final expenses if your term coverage expired by the time you die but what if you die after a lengthy battle with cancer or other condition that resulted in a shite ton of medical bills and you didn’t save/invest for years? Now your family can pay for the funeral with the whole life policy but they’re still fricked because now there’s half a million dollars worth of medical bills to pay.


Buy term and invest the rest.

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Another pro is, depending on the state, it may be protected from creditors. I have several friends who sold businesses and properties and put a lot of the proceeds in to whole life as a sort of safe harbor.

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They couldn’t have sold those businesses for too much because otherwise they would’ve created a MEC with those single premium whole life policies (assuming that’s what you’re referring to). Even if they used the funds to buy UL policies (which are even worse than whole life policies) the MEC rules still apply.