In this particular article, I was indeed evaluating the Whole Life policy as an investment tool. As I said in the article, I was interested to see if using the Whole Life policy as a hedge against market down turns would end up with more money. To keep all things equal, I made the assumption of "forfeiting the death benefit".

I agree that if you have a significant cash value in a Whole Life policy and your dividends can sustain the policy payments, it's probably best to keep the policy in effect.

But with the estimates I was provided, it would take 25 years of payments before my dividends fully covered my premium. Their effective dividend rate was 2%-3% depending on where you were in your policy.

So I ran the numbers a third time based on your feedback. Again, for the Term Policy, I bought two 30 year policies. The first for $13/mo and the second for $100/mo. with annual inflation premium increases. I invested the extra money for the first 30 years. In the latter 30 years, the $100/mo premium was paid out of the investment account.

The Whole Life policy premiums were paid for 30 years, after which I let the dividends pay the premiums. Since my dividends were paying the premiums, I invested that $100 premium into the market at a 6% rate of return (assuming a more conservative portfolio in retirement, also assumed for the term portfolio)

For this analysis, I removed the bear market assumptions/withdrawals since all I'm interested in is how much money I would have "self-insuring" with a term life policy vs. whole life. After 60 years, the whole life policy and investment portfolio have a combined value of about $372K. The term portfolio has a value of about $675K.

All in all, I really can't see a situation where buying a whole life policy makes sense from a financial point of view, whether that's for investing or for leaving money behind.


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