Whole Life Insurance provides lifelong death benefit coverage as well as a tax-deferred savings account.
A large portion of your premium goes into the general account of the insurance company, and this increases the cash value available to the policy holder at a growth rate dependent on the investment and sales experience of the company. Every dollar and amount of interest which is credited to the policy cash value is vested with the policy-owner and will not decrease.
The rate of return on the cash value tends to be among the best risk-adjusted rate of return available to anyone in a conservative account because of the types of assets which are part of the growth, at least with regards to mutual life insurance companies, which pay non-guaranteed but consistent dividends at a competitive rate back into their dividend-participating policies.
Still, this rate of return is conservative, and the opportunity cost of investing money in a whole life versus a stock market investment will be large. There are times when this kind of conservative, guaranteed money is preferable for some people, but most of the readers here at Tickeron will not be among them.
Still, if you are young and healthy enough to get the insurance, and you want to make a significant portion of your portfolio conservative investments a whole life might actually offer a better rate of return than the other conservative investments you were considering.
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