What do you consider an advantage?
Before you consider some of the advantages that 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?
Return ON or return OF
If you’re looking for a high return on your money, life insurance has no advantage. There is no question that you can get a higher 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’re more interested in a guaranteed return on your money, even if it’s 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 given time, with the possibility of it being worth more than the forecast, and under no circumstances less, and to know what your guaranteed death benefit is, then this would also 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 effect for a specified period of time, known as the term.
Permanent insurance is so called because it is designed to stay in effect 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 life benefits that are not offered on a term basis.
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 profit.
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 usually initially costs less than the total but more than the 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. 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 to never increase. As long as the premiums are paid, the policy is guaranteed to never lapse.
Maybe something of each?