What are the benefits of investing in a whole life insurance policy?

I'm 27 years old and have had a few insurance salesman try to sell me whole life insurance. They call themselves financial advisors, but no matter what I tell them, they continue to tell me that whole life insurance is what I need. The way I look at it is, I'm not going to need insurance at a certain point in the future. Why would I pay high fees to tie together my insurance and investments when I could just invest in my 401(k) and Roth IRA and buy cheap term insurance? I feel like these salesman have no experience and know less about personal finance than I do. What are some good reasons to buy whole life insurance?

Personal Finance, Investing, Life Insurance
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2 weeks ago
86% of people found this answer helpful

I'm impressed that you're able to get through their "financial advisor" shtick and see what they really are, salesmen. You're correct that combining insurance and investments is typically an inefficient way to address those two issues. There really isn't a good reason to buy Whole Life insurance from someone trying that hard to sell it to you. Now, that doesn't mean there aren't a few instances where Whole Life policies make sense, but the majority of these policies are improperly sold.

If you've maxed out all other sources of tax-deferred savings and have a lot of extra income to save away in a tax-deferred vehicle, then these policies can make sense. However, for them to make sense, you need to be in a high tax bracket, find a policy that isn't egregiously expensive, and dump a lot of money into the policy without it qualifying as a MEC. This allows you to get large tax-deferred growth and you can tap into the policy tax-free in retirement with loans, as long as the policy is designed correctly to not implode down the line. They can also make sense in certain business situations to provide some cash-out retirement money for business owners and protect the business in the event of an owner death. Whole Life Policies also play a role in some trust and estate planning.

However, I’m guessing that you’re not at the point where you need Whole Life insurance (most people never get to that point) and that these are just salesmen trying to sling their product. You're right to avoid them.

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