Life Insurance: Term, Whole Life, or Both?

I want to know what the community thinks about life insurance as an investment.

From my understanding, anyone with a family should at least have a term plan so that their family is taken care of if - G-d forbid - something happens to them. We see fundraisers all the time for families who tragically lose their breadwinner in the prime of his/her life.

As for whole life plans, they are obviously going to have much higher premiums for any plan that’s worth getting. My question is whether it’s a decent “safe” investment, as they generally earn ~5% compound interest through reinvested dividends and have the added death benefit which grows over time. I know that no one will get wealthy from a whole life plan, I just want to know people’s thoughts on it.

There is no obligation or Mitzvah to purchase life insurance in order for one’s spouse and or children to have money after one passes away. On the contrary, from a Torah perspective, it actually doesn’t make sense to purchase life insurance. Allow me to explain:

The Gemora in Eruvin discusses that if one has money, enjoy it and don’t try to save it all for your children after one’s death for a simple logical reason. If one’s children are supposed to have money they will have money without this inheritance. But if one’s children are not supposed to have money they will lose all this inheritance in a business deal.

Hashem takes care of His children and it is not our responsibility to care for our children’s finances for after we die nor do we have any power to actually take care of our children’s finances for after we die.

Our obligation is to teach our children a livelihood so our children can do their hishtadlut in an honest manner and lead honest lives.

We are also not permitted to waste our money. So if you have “extra” money you are not permitted to throw it in the garbage either. You can and should most definitely save money for expenses you may incur during your lifetime. For example, saving money to pay for your children’s tuition and weddings while you’re alive is the right thing to do. Saving for expenses your children will incur after your death is not necessary as we brought down from the Gemora.

There is also another Halacha which discusses someone giving away all his wealth before he dies leaving his children with no inheritance which is not permitted either.

There are many Halachot when it comes to saving and spending money and you should consult your Rav with specific questions.

So to answer your original question, since life insurance is not necessary (despite salesmen telling you otherwise) and it also has such a low-interest rate I would say its a terrible investment. You are better off investing that money into a low-cost index fund where you will make a lot more money and it will be available to you whenever you need it.

My grandfather, Rav Yitzchak Abadi, actually discussed this question about life insurance with Rav Moshe Feinstein. Rav Moshe writes in the Igros Moshe that its a mitzvah to get life insurance. My grandfather asked him about the apparent contradiction with the gemora in Eruvin that clearly states that saving money for ones family after death is a waste.

Rav Moshe responded that he agreed with my grandfather that life insurance is a waste and that he did not mean its a mitzvah. Rav Moshe said he meant that one may purchase life insurance if one wants.

I just got off the phone with R’ Yosef Fund (who is a walking shas, shulchan aruch, and more), as I wanted to get daas Torah on this. He told me that the gemara in Eruvin does not really apply to life insurance for halacha l’maisa purposes. It is actually a good thing to make sure one’s family’s existing expenses are covered and that he doesn’t leave behind unsettled debts (which includes a mortgage or other loans). He should also have money left behind to pay for his own burial. If one can do this without life insurance, then it isn’t necessary.

However, purchasing a plan that would potentially pay out significantly more money than his family would need to get by without him is more problematic. This obviously would vary with each family’s situation.

During the 17-minute call he went through many sources and t’shuvos. I apologize that i did not write them down so I can put them here as references. If anyone would like his number, please PM me. He is an amazingly knowledgeable Rav to ask any manner of question to.

Interesting. Rav Moshe Feinstein held the gemora does apply to life insurance. At least that’s what Rav Moshe told me grandfather.

Either way, each person must ask their Rav what they should do and one must follow what their Rav tells them. That’s how the Torah works.

Thanks for sharing.

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I personally feel whole life insurance is a complete waste for a couple main reasons.

  1. You don’t really start making money for a few years since the first year or two since those premiums go straight into your agent’s pocket. If you were automatically making 5% every year then that’s a different story. Being down thousands of dollars right away doesn’t make too much sense.

  2. Within three years, 25% of people can’t afford their premium anymore so they lose all the money they “invested”. Within 10 years, I think it’s almost 50% of people that stop paying their premiums. Maybe now you can afford the $5,000 annual premium but what if you can’t in three years? You just lost all that money if you don’t keep it up.

If you want to do your histadlus of having life insurance just get term which is way more affordable to keep. You’ll also be able to use the rest of the money on investments that could give you a much higher percentage back then whole life insurance can.