It used to. It wasn’t that long ago, 30 years or so, when the only way a person could have permanent life insurance was with a whole life policy.

Whole life is a cash value policy that was defined as having a level premium to age 100 with a cash value that equaled the death benefit at age 100. On the face it sounds like something that everyone ought to have. Then came universal life insurance.

With universal life you could do the same thing, but they allowed you to vary the premium amount if there was sufficient cash value to cover any shortfall. What they didn’t tell you was that for everything to work out you had to pay back the loan. What most agents didn’t tell you in the beginning and I have to say, probably most still won’t mention is the fact that their is a huge difference between guarantees and assumptions.

Just a refresher from an old post, the two following attachments point out that difference.



Back to the question at hand though. Does it really make sense to build cash value in your life insurance? Should you buy whole life? I know this really fluffs the skirts up on all those old New York Life and Northwestern Mutual agents, but the answer is NO.

If you can buy life insurance (that is what you’re buying right) for one third or less of the price of a whole life policy, with a guaranteed level premium to age 100 and a guaranteed death benefit to age 120, why would you put that extra cash into your life insurance? Why wouldn’t you put it somewhere where you can build real cash value?

Bottom line. With the reality of the universal life with a no lapse guarantee type policy, whole life is nothing more than a way for agents to make more money from you than they should. It is a cash cow for the agent and the insurance company and a cash drain for you.