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When is Cash Value Life Insurance a good or bad idea?
Buy term and invest the rest is something you will hear all the time, but actually cash value life insurance is a very misunderstood, useful financial product. Cash value life insurance makes sense if: If you you aren't maxing out your retirement accounts, just stick with term insurance, and save as much as you can for retirement. Otherwise, if you have at least 5 or 10k extra after you've funded retirement (for at least 7 years),  one financial strategy is to buy a whole life policy from one of the big three mutual insurance firms.  You buy a low face value policy, for example, say 50k face value; the goal is to build cash value in the policy. Overload the policy by buying additional paid up insurance in the first 7 years of the policy, using a paid-up addition rider of the policy. This policy will then grow its cash value at around 2% to 4% over the life of the policy....similar perhaps to the part of your portfolio that would would be in muni bonds; basically you are beating inflation by a small margin. Further, as you dump money into the policy, the death benefit grows. After 7 or 8 years, the cash value of the policy should equal the money you've put into it, and your death benefit will have grown substantially maybe somewhere around $250k in this example. You can access the cash value by taking a policy loan; you should only do this when it makes sense financially or in an emergency; but the important thing to realize is that your cash is there, if you need it.  So now you have insurance, you have your cash reserves. Why should you do this?  You save up your cash and have access to it, and you get the insurance for "free" while still getting a small return on your investment. You are diversifying your financial portfolio, pushing some of your money into conservative investments.