I caught an episode of the Suze Orman show this weekend and she had another caller with a bad whole life insurance investment. It seems there are a lot of people out there with whole life policies that didn't do all that well. Here's a previous example and another example.
For the caller this weekend they had the policy for 20 years and it didn't really gain any value.
Here are the details of their policy:
The policy had a death benefit of $100,000
They paid $300 / per quarter
Held the policy 20 years
Current cash value is $25,000
So they had put in $1200 x 20 = $24,000 and ended up with $25,000. Thats less than 1% appreciation.
What if you'd bought term an invested the rest?
At today's prices $100,000 of term insurance is relatively cheap. I did a quick search on QuickQuote and a 30 year old man could buy a 20 year term policy for around $120 a year. That would leave them $1080 to invest. If you put that extra cash into something safe like bonds at 5% you'd end up with over $38,000 after 20 years.
Its pretty easy to see which option is better:
Whole life : $1200 a year, $100k death benefit & $25,000 cash
Term life + savings : $1200 a year, $100k death benefit & $38,000 cash
Term wins by $13,000