In our parents' day or grandparents' day, life was reasonably predictable. In your twenties, you got married once and stayed that way. By the time you were 25, you had the job you would still hold at 65; you had one litter of children who left the nest by the time you were 40 and had finished college by the time you were 45. This left you 20 years to prepare for retirement at 65 and you were dead by 75.
Prior to the early 1970's, Whole Life insurance was the workhorse of the life insurance industry. To better understand why, let's review the key characteristics of Whole life.
Whole Life insurance offers death protection that builds cash value. The cash value is absolutely guaranteed to build at a rate which will cause it to equal the face amount of the policy when the insured would reach age 100. With Whole Life, the insurance company makes an either/or promise. The company will either pay the face amount upon maturity(the insured's death or attainment of age 100, whichever comes first) or return the guaranteed cash value if the policyowner surrenders the policy or stops paying premium.
These locked-in, guaranteed features of Whole Life have long been considered its greatest strength. They provided unshakable stability. However, for the last 30 years or so, Whole Life has become the object of a great deal of criticism. Why, for two reasons.
Reason No. 1 -- New Lifestyle Patterns
Today, Divorce is commonplace; children under one roof may be yours, mine and ours. Some people don't even get married until well into their thirties and some couples don't start having children until they are into their forties and fifties. People change jobs, mates and economic levels frequently. Some families even have tag team breadwinners -- "You work while I go to school and then I'll work while you go to school unless I join a cult, marry my receptionist and leave you with the kids!
Even without going through all of the soap opera possibiliies, the odds today of making one life insurance purchasing decision that would last a lifetime are infinitesimally small.