Whole life insurance is a very specialized financial tool for most families. Compared to other types of life insurance, it is expensive relative to the amount of death benefit you receive. That’s because you’re paying for two components: permanent life insurance coverage and a cash value feature. As a result, premiums are typically higher and the amount of coverage is often lower.
When Whole Life Insurance May Make Sense
There are situations where whole life insurance can play a role in a financial plan.
It is typically most relevant for:
- High-income earners who have already maxed out their own retirement accounts and their spouse’s retirement accounts
- Families with estate tax exposure, generally those with more than $30 million in assets
- Situations involving permanent legacy planning, liquidity needs, or business succession planning
In these cases, the structure of permanent life insurance may support broader planning goals.
Why It’s Not a Primary Wealth-Building Tool
For the average household, whole life insurance is usually not a primary wealth-building strategy. In many cases, the math favors a simpler approach: buying term life insurance for protection and investing separately for growth.
Insurance is designed to solve risk, while investments are designed to build wealth. Blending the two tends to work only in very specific planning scenarios.
Have a question or want help understanding your options? Contact us today to schedule a complimentary Q&A with one of our team members.
