Per the definition Whole Life Insurance is overfunded in the early years of the policy. This overpayment produces a very small savings cash account which may be eligible to earn dividends.
Sound Great? Its not. When compared with the open market for term life insurance, Whole Life can be 8,10, 12 and more times expensive when compared with a 20 year term policy.
Many insurance agents will make all sorts of claims about whole life insurance such that it is a great investment, be used for college savings, etc. Most of these statements are not fully accurate and I would suggest that anyone considering buying any form of life insurance for any purpose other than pure insurance, really do their homework.
I think you need another opinion. Whole life insurance is the only insurance product that will guarantee that if you pay the annual premium on the policy, the policy will never lapse. This guarantee has incredible value and the terms of the policy must be met. In addition, the policy will build over time, cash value which is an asset that you own and can draw on in the future by borrowing from the policy. This is not something I would necessarily recommended but in a time of a family emergency where yoor cash flow may not allow you to pay the premium, in many cases you can borrow the premium from the cash value which will create a loan. Whole life is sold by life insurance agents who earn commissions. Anyone can question the level of commissions but in many cases they can be negotiated if you have enough information to do so. An alternative to whole life insurance is universal life either with a fixed investment or a variable investment. As a fee-only financial advisor who does not sell life insurance, our financial plans very often recommend life insurance and I'm a big proponent of cash value insurance for those who can afford it. With universal life, the premiums can vary and I only use a fixed policy for our clients. The downside to universal policy is that the terms are not guaranteed since the premiums are variable and the cash value will also vary depending on how much is paid into the policy. In either case, once cash value begins to build and assuming there comes a point in time where you may have to skip a premium, the policy can be borrowed upon to make the annual premium so long as there is cash value in the policy and this is where whole life and universal life has a major advantage over term insurance which if you miss a premium payment, it'll terminate immediately. I sincerely hope this helps a little and good luck
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