What do you consider an advantage?
Before considering some of the advantages whole life insurance has over other life insurance, it’s important to know what you consider to be an advantage.
What is more important to you, the return ON your money or the return ON your money? Do you care about guarantees or do you prefer risk?
ON return or OF return
If you’re looking for a high return on your money, there’s no advantage to life insurance. There is no doubt that you can get a better return on your money by investing elsewhere, if you are willing to take the risk. The risk is that you could lose some or all of your money and there might not be a death benefit.
If you are more interested in a guaranteed return on your money, albeit a fixed and probably lower return than you might get elsewhere, along with a guaranteed return on your money, then this would be a key advantage of going this route.
If you want to be able to forecast how much your money will be worth at any time, with the possibility that it will be worth more than the forecast, and under no circumstances less, and know what the guaranteed death benefit is, then this too would be a definite plus.
Compared to other insurance policies
Life insurance can be divided into two main types: temporary and permanent. Both types will pay a tax-free death benefit if the policy is in force at the time of death.
Term insurance is temporary because it is designed to be in force for a specific period of time, known as the term.
Permanent insurance is so called because it is designed to remain in force for the rest of someone’s life.
The two main types of permanent coverage are universal life and whole life. Both have cash value and living benefits that are not offered at term.
Indexed universal life insurance purports that there will be no loss of cash value and does not guarantee that there will be a gain.
Whole life guarantees that there will be no loss of cash value and guarantees that there will be a gain.
Compare Total Cost
Initially, the term will almost always cost less. However, the money you pay for the term is money you will never see again. If you outlive the policy, which is often the case, there will be no death benefit.
Universal generally initially costs less than full but more than term. There is a lot of premium flexibility with this type of coverage. If planned properly, a reasonable return and cash value gain is likely to be realized. Coverage is also likely to be in effect for the rest of your life.
The whole life policy will have the highest initial premium, but the premium is guaranteed never to increase. As long as the premiums are paid, the policy is guaranteed never to lapse.
Maybe some of each?