Insurance

Insurance is generally to off-load risks that you can not afford to take.

Most of us can’t afford to pay off someone’s life if we run over them with a car, so we have auto insurance. Most of us can’t afford to replace our entire house, so we buy house insurance.

But there is a ton of insurance out there that’s probably a terrible deal. Long Term Care insurance is generally a bad deal these days. Perhaps the situation will change, but the way insurance companies currently structure their deals, they are almost always a bad deal.

Insurance on consumer items are generally a bad deal, though some are a wash math wise. It just depends on the particular product. If you just default to no, you will probably be rewarded financially.

Disability insurance and life insurance are complicated. If you are the sole income and you have dependents, then they are probably worthwhile. If you are financially independent, they are almost certainly useless. If you are single, no children, they are probably not worth it.

Whole Life

Generally not useful for most people, some exceptions:

Imagine a farmer who has say a bunch of land, but has basically no cash(because they have loads of debt on farming equipment/buildings/etc). They want their kid(s) to inherit the land and not have to sell anything to pay any EOL expenses, debt, etc.

This is a good example of someone with a probably valid reason to hold a whole-life insurance policy.

The farmer is arguably very wealthy, except that without the land value(which they would never sell, making the value mostly meaningless), they might be doing worse off than the McDonald’s teenage employee.

Another reason is a parent(especially a single parent) who works, but has a child with a disability. They have no life savings, but they want their kid taken care of when they die. Since they have basically no net worth, they are working until they die or fall apart no matter what. This is another perhaps valid reason to own whole life. Arguably, if their child qualifies for an ABLE account, that might be a better way to go.

Would either hypothetical person above be better off, not buying insurance and just investing? Maybe. With Whole Life Insurance, they know the answer. Any other situation, the answer might be yes or no, depending. In either case, they really have to want that guaranteed payout. It certainly comes at a cost.

Another potential example(and the farmer example above could fit this in some scenarios), is someone with a very high net worth(over the inheritance/estate tax amounts) and wants to buy a whole life policy with their money to hopefully get them below the taxed amount. The life insurance payouts are not (always? I dunno, every state is unique here) attached to the estate tax amounts. Anyways, it basically amounts to a strategy to avoid the estate/inheritance taxes.

Again, context matters A LOT here. Whole life is expensive stuff, you have to really want/need that guaranteed payout.