When you are getting a whole life insurance quote, it is important to factor in several things.   Are you buying enough death benefit, or should you supplement the whole life with a term rider?  Should you overfund the policy above the premium to take advantage of the tax favorable nature of the cash value?  If so, how much should you overfund the policy?  Do you have disability waiver of premium included in the quote?  Is it a good company with a long track record of good dividends.

These are important questions that should be asked as you get a whole life quote.  Whole life is not a commodity like term insurance and it is important to pick a good company and to structure it the correct way.   An inexpensive term rider can be included in the whole life plan, that will increase the death benefit.   This rider can not only help you meet a higher exposure level, but also give you more term that can be converted to whole life later also.   This is a good option to have once you understand the value of whole life.    In regards to overfunding the policy, I would highly suggest it.   The more you overfund the policy, the quicker it will grow.  The money the is contributed to the cash value will grow on a tax-deferred basis and can be accessed on a tax-free basis if done correctly.   The IRS has put a limit on how much you can contribute on each plan for a reason.   They don’t seem to be very excited about plans that can be accessed tax free.  I would suggest you take advantage of this benefit as much as possible.

The policy should have disability waiver of premium on it.   This will waive your premium payment in case of a disability.  If you can qualify for this rider, it is really valuable.   Also, it is critical that you select a good mutual company with a great track record of paying dividends.

Regular vanilla whole life insurance has taken a beating from some in the media that profess that it is too expensive and that you should always buy term.   I agree that term is often the best solution for some clients at that given point in time, but having whole life can be powerful vehicle.  Many times to meet large insurance needs  our clients will buy a majority of term and buy a smaller portion of permanent insurance.   This may be the only affordable way for the time being to meet that large insurance need.

Term life insurance is like renting and the premiums are usually much less expensive than whole life at first.  What happens at the end of the level term is the premiums skyrocket through the roof and most people drop the policy at that point.  The advantage to whole life insurance is that you lock into a premium amount and it stays level forever.  When the level term ends and the premium is skyrocketing, the whole life keeps plugging along at the same level.  If you select a good mutual life insurance company that consistently pays a good dividend, then you will also have built significant cash values.   The cash values grow tax deferred and can be used to help finance things during your lifetime while you continue to have permanent insurance.   For example, you want to buy a business at age 42 and you have accumulated a cash value of $56,000.  The business is going to require an initial investment of $37,500.    You pull the 37.5 out of the whole life and the insurance company charges a loan interest rate.  Let’s say it is 6% they charge and you pay the loan back at 10% interest.  Not only are you paying yourself back, but you are making a 4% spread on the money creating a turbo charge effect on your policy.  Four years later, after paying the amortization schedule for the business, you borrow money from yourself again to buy a new car.  Of course you pay yourself back once more.

The whole life cash value is guaranteed to get better no matter what.  There are not many financial vehicles that you can say that for.