My parents bought me a whole life 10k policy on me which has accrued up to 12,xxx now when i was like 5 and they are still paying for it as its like 100 bucks a year. I have no kids or spouse, and thus have no reason to carry any more. if i die, whatever isn't mine can settle to the state/bank that owns it/etc.
If i was in your position with a wife and small child, I'd be looking for short term (5 year) policies in the 500k range, not whole life
Prepare for wall o'text.
B's point makes sense for someone in his position in life...
Unfortunately, for things like retirement and legacies, we have to decide how we want to handle those issues when we're still practically kids - otherwise much of the benefit is lost.
What I mean is when you're 25 or 30 and have no kids, you don't see the necessity in leaving a legacy or the realize the dependency that others may have on you at some point. When you're 45 and have kids or when you're 65-70, have kids and grandkids, your perspective may change. By that time, the gig is up. You won't be able to leave a legacy through a life insurance policy - you'll have to have been considerably wealthy or have planned for excess money in your retirement fund to leave behind a legacy. Assuming you choose this privately funded route, you also must guess the correct time range that you'll die in and accurately predict your costs of living and medical care throughout retirement - otherwise you'll show up short at death's door step.
Term policies are great for people that need to address a gap for a period of time. I.e., you're 30, just married, just bought a new house and have a wife with a baby bump. You need $1mil to cover the house and your wife - but you're strapped for cash. You purchase a 30 year term policy, so that by the time the term policy expires, your family's exposure to the mortgage expense will be gone. The 30 year note will have presumably been paid off at this point. ...but you have no advantage of the death benefit, because the policy expires before you die.
You essentially rented or leased the car. (I know from years back, how everyone feels about renting here although I'm sure thats changed a bit with the recession). That's all fine and dandy if you're happy with returning the car and not having any equity.
If you want to pay additional and purchase the car, the whole life policy will give you that advantage. Now Ian, I would just invest the difference in stocks, you argue. To that I would say, that plan works if you can actually commit yourself to saving the money every month. 9 out of 10 people won't make that commitment for a prolonged period of time. (Obviously this is one of the reasons why homes were always Americans' nest eggs - because they required forced savings for 30 year periods of time) Also, just because you were to purchase a whole life policy doesn't mean that you shouldn't continue to invest additional money in asset classes. However, by investing in the life insurance policy, you're essentially investing in bonds with a death benefit. Therefore the life insurance policy gives you many of the same benefits you would have had from a "safe" bond investment (again, i'm sure perspectives are changed in regards to safe, after what just happened to the market) as well as the death benefit. The third major benefit you receive is the tax shelter benefit - that you would not receive with stocks/bonds. This is how wealthy individuals pass this businesses or inheritances along - in addition to trusts and other tools - without having Uncle Sam completely ruin them.
These are my ramblings after 36hours without sleep.
Full disclosure, I just left my profitable employment to pursue a career in the insurance field. I sell all sorts of commercial insurance policies to business owners and help them with their estate planning strategies - so my perspective will be different than the perspective of others who specialize in business to consumer life insurance sales.
My .02 cents.
