@shilolo, @mderr2400, it is illegal to represent life insurance as an investment vehicle. The purpose of buying an insurance policy is to leave something behind when you die. The cash that accumulates in a whole life policy has the effect of reducing the insurer’s risk as you age, which allows the premium to remain level until the plan is paid up – after which you still have insurance, but you don’t have any more premiums. The fact that you can use the cash at some point is secondary to this purpose.
I mention this because a lot of people outlive their term insurance policies and cannot afford to renew them once the term expires. At a minimum, you should have enough life insurance to pay off your final expenses, so they don’t have to come out of your family’s pockets. Probate takes time. Life insurance pays immediately, with no tax consequences to the beneficiary.
If you buy a plan with a modest face amount, e.g., $25,000, when you’re young, the rates will be low, and in all likelihood, the plan will either be paid up or have enough dividends to pay its own premiums after 15 or 20 years – sometimes less. Then you put it in your safe deposit box and forget about it. If you live to be 100, whole life still pays on your death. For most people, a combination of plans is the best strategy; you buy a small whole life plan and supplement with term as a hedge against dying young.
I don’t sell life insurance for a living, but I do work in the industry, and I can run numbers. In fact, I run these numbers every day, and they cut through the conventional wisdom quite convincingly. Most financial pundits compare the internal rate of return on a whole life policy to the difference between WL and term premiums invested in equities, typically at a 10% rate of return. Then they compare the cash value of the policy in 20 years to the market value of the securities, and declare the insurance policy to be trash. What they don’t talk about is what happens to you when your 20 year term policy has expired, you have emphysema, and you’ve got two kids in college.
When you think life insurance, you don’t think about what it will pay you after 20 years, you think about what it will pay your hiers on your death.