The purpose of all insurance is to mitigate risk - the risk that your home will be damaged, the risk that you will need medical care, the risk that you will be in a car accident. The list goes on.
Life insurance can mitigate two risks. The first is the mortality risk, the risk that one won't live the average life span. The mortality risk covers the premature death.
The second risk that whole life insurance can mitigate is market risk. You've probably heard the phrase "buy term and invest the difference." The mere act of investing means putting your capital at risk, although the risk can vary in degree.
Individuals who retired within the past several months know that all too well. The Dow and the S&P 500 are down 34.85% and 30.75%, respectively, since December 31, 2019. For those not yet drawing on their retirement account, that may not be catastrophic (that is, they may have enough time to recover before they retire), but recent retirees could be in trouble due to a phenomenon known as sequence of returns risk.
Whole life insurance can mitigate market risk because life insurance companies are limited by law as to how much they can invest in the equity markets. This means whole life policies will, all other things being equal (which they never are), produce lower returns relative to the market during a bull market and higher returns during a bear market.
This is the reason whole life insurance shouldn't be viewed as an expense. With all other types of insurance, a premium is paid with the hopes that a claim will never need to be submitted.
With whole life insurance, a claim will ultimately be paid (provided one doesn't surrender the policy), so the premium outlay will generate a return. Just how big that return will be is dependent on several factors including primarily, when death occurs, but also on the insured's age at the time the policy is issued and the underwriting classification received.
So the takeaway from today's missive is to not view a whole life premium as an expense, but rather as capital allocated to a non-correlated asset.