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Benjamin Carr was a licensed insurance agent in Georgia and has two years' experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

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Reviewed by Benji Carr
Former Licensed Life Insurance Agent Benji Carr

UPDATED: May 2, 2022

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Part of the nobility in purchasing whole life insurance is taking care of those you love the most by providing them with a death benefit or lump sum payout upon death.

Even though purchasing a permanent death benefit is an important part of life insurance, this is not the only benefit when it comes to certain types of permanent life insurance policies.

Certain products such as term life insurance OR guaranteed universal life ARE primarily about securing a death benefit.

Benefits of Whole Life Insurance

This article will zero in on the five of the most exciting benefits of whole life insurance that ARE available to the policy owner, in life, and NOT just the beneficiaries upon death.

Before diving into this discussion, let’s set the stage.

When we’re talking about whole life insurance in this article, we are specifically referring to “dividend-paying whole life insurance”. The other types of permanent life insurance such as indexed universal life or variable universal life insurance do not necessarily apply.

Not that there is anything wrong with universal life insurance. Some of the benefits to be discussed may actually overlap with these other types of permanent life.

However, the following benefits utilize a whole life policy as a safe bucket investment.

For now, let’s consider this policy a sort of “home base” for your safe capital that can be easily accessed for other higher-risk endeavors such as equities or real estate investment. With that in mind, let’s dive in.

You can easily navigate this post by clicking each of the top 5 benefits and the best companies for each one.

  1. Whole Life Insurance acts as a Safe Bucket Asset
  2. Whole Life Insurance offers Guaranteed Cash Accumulation
  3. Whole Life Insurance and Tax Advantages
  4. Whole Life Insurance and Legal Asset Protection
  5. Whole Life Insurance Provides Ready Cash for Other Investments
  6. Best Whole Life Insurance Companies

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1. Whole Life Insurance acts as a Safe Bucket Asset

Bucket of MoneyMost people that become interested in permanent life insurance for any reason, other than securing a permanent death benefit, are motivated by accruing cash value within the policy.

For those who gravitate toward the traditional whole life genre of permanent life, they are typically interested in the safety and stability offered.

I can hear the critics shrieking now, insisting that universal life policies are just as safe.

This point is hotly debated, and I’ll touch on the pros and cons of each now in the context of providing a safe bucket.

The Need for a Safe Bucket

The idea of a safe bucket using whole life insurance as an asset is not new and is certainly not exclusive to permanent life insurance. On the contrary, this concept is one of the essential aspects of wise money management and well known in the investment world.

Simply put, most people are invested either in the financial markets or real estate, and these arenas carry a certain amount of inherent risk due to economic cycles.

The logic goes…in a bad year, if the market drops 10%, due to the reduction of basis in the account, it will take longer to make up for that 10% loss than did to lose it.

Even if the market gains 10% the following day, the full 10% will not be recovered. This is a math question and we have some more ground to cover, so I’ll leave it there.

Whole Life vs. Universal Life as a Safe Bucket

The following sections will touch on the advantages of whole life insurance, and they are all attributes of why whole life is the best safe bucket investment. The short version, however, is that whole life is not basing the cash accumulation on the performance of any of the financial markets.

In today’s market, for example, it is possible to get a guaranteed 3.5-4% return plus dividends of 2-2.5% and other non-guaranteed accruals that can be historically documented regardless of economic conditions.

Indexed universal life, on the other hand, bases the cash accumulation on any number of market indexes such as the S&P 500. To offset the obvious risk of loss, indexed universal life policies generally offer a floor of 0 – 1% and cap the gain somewhere around 10-13%.

Variable universal life, just to mention, does not attempt to mitigate market risk and in this way is identical to investing in the markets, plus a death benefit.

Over 170 years of history reveal that whole life insurance has weathered every economic cycle and has offered a consistent return to policyholders through the darkest of times.

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The fact that whole life is a fixed premium plan as opposed to universal life’s flexible premium structure, also adds to the inherent stability of whole life because the policy does not have to be actively managed in order to assure that it doesn’t lapse.

Here again, some universal policies have opted to offer a “no-lapse guarantee” to mitigate this inherent risk.  However, no lapse protection only pertains to the death benefit not the cash value which is typically raided to pay premiums that go unpaid for “flexibility” reasons.

Not that universal life doesn’t have its benefits and uses. Its inherent flexibility and potential for high market returns may be an ideal scenario for some.

Now that we’ve addressed the distinctions between whole life vs universal life, let’s dive into the other benefits of whole life insurance.

2. Whole Life Insurance offers Guaranteed Cash Accumulation

stacked coins accumulating from whole life insuranceIn discussing the difference between whole life vs universal life policies, we touched on the fact that traditional whole life insurance offers guaranteed cash accumulation. This is a simple fact with no fine print. In the world of whole life insurance, guaranteed means guaranteed.

Additionally, every whole life policy has both a guaranteed and non-guaranteed projected return in its illustrations.

The guarantee is set to occur regardless of economic conditions or company performance, and the non-guaranteed portion is based upon dividends and other factors related to the performance of the company.

So, in our example above, the 3.5% would be guaranteed and the non-guaranteed projected growth would likely be another 2.5 -3%.

Another factor that can make these returns attractive and dependable is the history of the most well-known mutual whole life insurance companies.

Many top dividend-paying whole life companies can offer an impressive history of dividend payments for close to 200 years.

3. Whole Life Insurance and Tax Advantages

Tax Advantage with Whole Life InsuranceSpeaking of whole life insurance dividends, whole life insurance offers considerable tax advantages.

Simply put dividends that are paid to policyholders are not counted by the I.R.S. as taxable income.

Why are non-taxable dividends allowed?

The answer goes back to what we talked about in our first paragraph in referring to mutual participating whole life insurance. Mutual companies, as opposed to stock companies, are technically owned by the policyholders. These companies offer “participating policies”, which means that the policy owners are participating in the profits and losses of the company.

Dividends are paid when the amount of premiums paid by all the policyholders exceeds the overall expenses of the company. For this reason, the I.R.S. considers dividends as a return of premiums to the policyholders and NOT taxable income.

Generally, the policy owner gets to choose what to do with the dividends. The tax-favorable aspect of dividends in a sense can supercharge the cash value accumulation inside of a whole life policy if the policy owner elects to have the dividends reinvested into the policy.

In addition to dividends, proceeds that accumulate within the policy are NOT taxed as long as they are left in the policy and not withdrawn or surrendered. Even if withdrawn, the accumulated cash is NOT taxable until it exceeds the total amount of premiums paid into the policy.

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4. Whole Life Insurance and Legal Asset Protection

Asset Protection with whole life insuranceDepending upon your state of residence, the laws may afford protection for your life insurance contract.

This is the asset protection aspect of permanent life insurance. Many people aren’t aware of this and yet it’s a powerful fact to consider. In a culture of raging lawsuits, your brokerage account, mutual fund, CDs, and bank accounts stand unprotected from judgment creditors.

This type of risk and various asset protection strategies are explored in some depth in the Estate Planner’s Tactical Guide, which can be downloaded for free on our website.

In a nutshell, in the fallout from a civil lawsuit, liens can be attached fairly easily to all unprotected assets. The cash value in your permanent life insurance policies is typically treated under state laws as protected assets, and in the best states, the cash value may be fully protected from lawsuits.

This is another characteristic of whole life insurance that makes it the ideal safe bucket investment as discussed above.

5. Whole Life Insurance Provides Ready Cash for Other Investments

Cash Investing with whole life insurance

When we talk about whole life insurance as an asset, it is easy to draw an analogy between real estate and whole life insurance for a few reasons.

First, real estate builds equity in the same way that whole life insurance accrues cash value. However, with whole life, a portion of the accrual is guaranteed…not so with real estate.

Another aspect is that real estate is often used as collateral to secure loans with third-party lenders. In the same way, the cash value in your life insurance policy can be used to secure loans, but with a few additional benefits that surpass real estate.

Benefits of Whole Life Policy Loans


Most people know that taking an equity loan against your home or investment property requires jumping through quite a few hoops with your chosen lender. There is an application, followed by a hard inquiry on your credit, followed by a lengthy approval process that can take weeks to months. Not so, with whole life insurance policy loans.

Most life insurance companies offer the policy loans directly upon a simple request, and proceeds can often be received in a matter of hours.  There is no application process for policy loans, no impact on your credit and you cannot be denied. Of course, I should also mention that loans do NOT constitute income.

If this benefit isn’t yet clicking, I suggest you slap yourself now or douse yourself with cold water. Think about the fact that people build wealth in real estate by acquiring assets and leveraging those assets to purchase other cash flow assets.

This is also a major benefit of whole life insurance, and arguably the scenario is superior to real estate. Don’t take my word for it, google how Ray Kroc, of McDonald’s or Walt Disney, jump-started their financial empire.

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Low Interest Rates

Another favorable aspect of whole life policy loans is low interest rates. Admittedly, we are in a low interest rate climate, so policy loans can be obtained at rates of 4-6%. However, those in the know predict that if interest rates were to rise, dividend rates would soon follow and this is important when considering the impact of outstanding loans on policy performance.

Non-Direct Recognition

One of the key aspects of using life insurance loans as collateral and related strategies is to be able to take out policy loans with no impact on policy performance. This is an important aspect of what is called non-direct recognition whole life companies.

Non-direct recognition, simplified, means that the policy dividend rates are not “adjusted” due to outstanding policy loans. This would allow the cash value to continue to accumulate unaffected by the outstanding loans.

This aspect of policy loans could easily occupy an entire article and is oversimplified here. For example, some direct recognition companies show a solid history of performance regardless of policy loans and still may be strong contenders with the non-direct recognition companies.

Financial Arbitrage

At the core of the direct and non-direct recognition question is the ability to create a financial arbitrage with cash value. For example, if you borrow $10,000, secured by your policy, at a rate of 6% and loan it out as a hard money loan at 10%, you just created an arbitrage.

Similarly, if you invested your $10, 000 in real estate or another higher-risk opportunity, perhaps your arbitrage increased. But it is better than that if you consider that your original cash value has not stopped working and is still accruing inside your policy. So, even if you are breaking even, your capital loaned to the third party or reinvested is not costing you anything and is actually still working for you.

Velocity of Money

Keeping money moving is at the core of a financial philosophy called the velocity of money. This concept is nicely described by George Antone in his book, the Banker’s Code. In the example of a financial arbitrage above, the policy owner’s money is working in a number of ways and never stops moving. The life insurance cash value is still working, and the money has been reinvested in a second venture offering higher potential returns. Dividends continue to be paid and tax-free accrual within the policy continues.

Conduit Wealth Building

All of the above are the components of what we call a conduit wealth-building strategy. On a grander scale, this involves creating multiple assets of safe buckets that may then be safely leveraged to pursue other investments such as real estate, equities, or other entrepreneurial ventures.

Best Whole Life Insurance Companies

So which whole life insurance companies are the best at conduit wealth building?  It depends.  We’ll list the top companies being used, but it really does depend on your situation.

Keep in mind, even if you do purchase whole life insurance from one of the companies we mention, the most important part of conduit wealth building is to structure it correctly. This means you’re contributing the most amount of money to the cash value as you’re allowed to while preserving the tax benefits.

This is so important and many agents won’t structure it that way because they’ll receive a bigger commission.

To keep agents honest, you can compare illustrations your agent sends you.  It’s ok to share illustrations with other agents to make sure you’re getting the best-designed policy for maximum performance – just make sure the agents are comparing apples to apples.

Now I’ll make it simple and break down the best whole life insurance companies into (1) whole and (2) indexed universal life.

For whole life insurance, make sure you look at Foresters and Assurity before purchasing from another company.

You’ll likely learn of these cash-value life insurance policies from a captive agent from Mass Mutual, New York Life or Northwestern Mutual…but make sure you compare their illustrations to these 2 companies first.

For indexed universal life insurance, make sure you look at North American and Prudential.  There are a lot of indexed universal life insurance policies hitting the market right now. These 2 have the best products when you factor in performance, upside, guarantees, and strong financial ratings.

Products get updated monthly and we’ll do our best to keep this article current.  If any of the companies mentioned above get overtaken by another company, we’ll update it here.

In other words, feel confident in the companies we’re recommending and definitely get rates from those carriers – even if you have an illustration from another agent.

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Final Thoughts

Whole life insurance (and indexed universal life insurance) are great ways to accumulate wealth on a very tax-favorable basis.

To learn more about the benefits of whole life insurance to you as a potential policy owner OR to discuss any of the above concepts in more detail.