Throw away for obvious reasons to come.
Lots of people here like to ream the whole life insurance policy. They make it sound like you are a boon if you even consider it. But with everything here, it is a personal choice. I'm just being a voice for those who might consider it. I'm also writing this to get your constructive feed back on our (my husband and I's) perspective. If you are just going to shit post, go somewhere else.
Background: My husband and I live in Silicon Valley with one FANNG income. I stay at home with our two toddlers. I quit college with just an AA to follow him and my dreams. We are three years out of college and have always been financially aware/conscious. Originally I was against all forms of life insurance, including term. I wanted to self insure and as a math major with 122 hours behind my degree (I switched 3 times and had about 18 hours left of hard classes to go) I was able to do the math and run some cost analysis. From purely a numbers perspective it didn't make sense.
We were gifted our first term policies on our wedding day. My husband's brother worked for everybody's most hated firm. Yep those guys. Anyway, he bought us each something like $200k term and agreed to pay for it for about 18 months. Sweet deal. Within this time frame our first child was born. We learned what it was like to pull in a huge salary. Then the fight happened.
It was time for us to take over the policy. Issue number one I had was that the policy rep was in fact our brother. I will never mix finances and family together like that. So we agreed to use a different agent. No biggy, and brother understood. Then, we had to iron out if in fact we wanted to keep both policies. There was no reason to keep the policy on me, or so I thought. My husband wanted to keep it, because if I were to die while taking care of our son, he would want to take a considerable amount of time off work and reevaluate life in general plus make new accommodations. All while not eating into our NW.
But how does this apply to whole life? Well, once we started to dig into the insurance realm and talk to a different adviser to see what our options are (always a good idea to get the most information possible) we were introduced to the idea of whole life. My head just started to scream. This was a worse option! But wait, there's more.
Let's take a step back and evaluate the situation we are in. My husband works, I keep the house and raise the children. While I am a more than competent young lass, my passion is my family/children. It was never in our minds that I would ever have to earn a dollar to survive. Our plan is to be FIRE by 35-40ish. So, if possible, in the unlikely event that my husband dies, why would we want anything else for our family? Child number two was well on the way during the switch over. So for the security we decided we wanted, we needed a finical vessel to accomplish our goals. For the amount of money we are talking term policies are just ridiculous.
The Case for Whole Life: It gives you options. With term if you want out, you basically loose all of your money and it expires when you turn 80. It's gone. But with Whole Life you have cash value. No it's not what you paid in, but if done correctly is significantly more than 50% of your premiums. This is not always the case. You have to fund your policy higher than the minimums. In fact, we fund the policy to the legal limit. Whole life is tax free growth. FASFA numbers are not effected by your cash value in a life insurance policy (I doubt this will matter for our kids, but you never know). We are also guaranteed* (but not legally binding) a dividend that historically has been at 4% or better. It diversifies your portfolio, and while may cost you a bit more, gives you a service. You can never lose your money, once it's in the cash value it stays, even in a bear market. We no longer make decisions on where is the safest place to put our in case of death money. We no longer stress about what ifs. It relieves the VTSAX verses bond tenting verses bitcoin debate.
The cost: Sure, if we invested the money ourselves, we could potentially have a higher NW. We spend about 1% of our gross salary in unrecoverable "fees" to have the insurance. Our standard of living is well below our means to front load this account. We will pay a premium for 10 years, and then never again. We have our adviser check in with us once a year.
Edit: Some math done in the comments that compares the same amount of term to whole life. Probably should have included this in the original post. The policy on my SO is for 2.5mm, our FI number. It is as high as it is because if he dies tomorrow, he wants the kids and myself taken care of (we can't use the 4% rule when I expect to live another 75+ years) so that would be a yearly withdraw around 75k, assuming no large costs for university. A term life policy on him for 2.5mm would run around $800, which is only about $200 less than what we lose in whole life "fees." It actually comes out ahead for us to have whole life if you compare it to term for this reason. 200x12x10=24,000. (The price difference between term and whole, times 12 months a year, times 10 years). Our cash value after one year was already higher than this.
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