I was mentioned in an online social media post the other day as being an expert in whole life insurance. It was in reference to some comments and questions that a few others had concerning the use of whole life insurance in financial strategy.

I was happy to have been recognized and contributed a short post expressing my opinion. I was asked a couple additional questions, which I answered, and then logged off.

The next day, my notifications indicated there was more activity on the same feed, so I checked it out. Someone had made some posts containing emotionally charged statements about whole life insurance. The posts consisted little of facts and mostly of platitudes spouted by so-called financial gurus.

I bowed out. Most people make financial decisions based on emotion, and this person had an emotional aversion to whole life insurance for whatever reason. I have yet to see an argument carried out on social media end with all parties agreeing. It is a waste of valuable time-time that is better spent associating with folks who actually value your insight.

However, this exchange did remind me that whole life insurance is misunderstood by a lot of people. That is unfortunate, because it is one of the most time-tested, versatile, and well-designed financial products on the market. Its applications include: safeguarding, growing, and transferring generational wealth; providing a source of income; creating an instant legacy; providing estate liquidity; enabling business succession; and the list goes on.

In an effort to spread the truth about this product, this is the first in a series about some common whole life insurance myths that I hear on a routine basis.

Myth-Whole life insurance is a terrible investment. Instead, buy term and invest the difference in other places. 

This is a misleading slogan for a number of reasons. Whole life insurance is not an investment. While a properly designed policy can outperform other financial products in the long run, whole life should be compared more closely to savings accounts, mutual funds, and other places suitable for storing cash safely.

Whole life insurance has a cash value component that has a guaranteed growth rate, grows tax deferred, and can be accessed throughout the policy owner’s life. Term insurance does not. While it’s likely that a whole life policy’s cash value will eventually exceed the premiums paid (especially with a dividend paying policy from a mutual company), all the premiums put into a term policy are gone forever.

And while it is possible to purchase whole life insurance and then leverage the cash value for other investments, opportunities, and emergencies, a term policy offers no such advantage. Whole life insurance is an AND asset, not an OR asset, and a properly designed policy will be a blessing for the policy owner’s entire life.

Comparing a “buy term and invest the difference” philosophy with positioning whole life insurance as a tier one asset in your overall wealth-building strategy is like comparing apples to oranges.

Instead, focus on your overall financial strategy and consider how a product will help you achieve your objectives.

Stay tuned for more myth-busting in future articles and newsletters.