The History of Whole Life: Why This Once-Forgotten Financial Tool Is Making a Modern Comeback

I get asked from time to time about if whole life insurance is so good, why isn’t its use more widespread? The answer is, well, it was, up until the financial advice of the day shifted from guarantees to growth potential.

Whole life insurance was once one of the most common savings vehicles for North American families, particularly during the late 19th and early 20th centuries. Its popularity arose from its dual function: it provided life insurance protection and also accumulated a guaranteed cash value that could be accessed by policyholders while they were still alive.​

During its height, ordinary (whole) life insurance was widespread across diverse socioeconomic groups, and a significant fraction of household savings was held in these policies. For example, by the mid-20th century, life insurance companies accounted for approximately one-eighth of all funds in the U.S. money and capital markets, highlighting their important role in household finance.​

Families were drawn to whole life insurance because it offered:

• Guaranteed cash value growth in addition to the death benefit.​

• A disciplined, almost "forced" system of regular savings through premium payments.​

• Tax advantages and the ability to borrow against the policy’s cash value, providing liquidity in emergencies or to fund large expenses.​

• A means to supplement retirement income, cover old-age needs, or provide for heirs.​

The design of these policies however, are not nearly as efficient as they are today.

Shift Away from Whole Life Insurance

Despite its early popularity, public opinion shifted away from using whole life insurance as a primary savings vehicle starting in the mid-20th century due to several factors:

• The introduction of Social Security in the U.S. provided a new, inflation-adjusted safety net for retirees, which addressed some of the limitations of whole life policies, such as their vulnerability to long-term inflation.​

• As inflation accelerated during and after World War II, the fixed returns of whole life insurance lost value in real terms compared to newer financial products and government programs.​

• The rise of alternative investments and savings accounts (such as mutual funds, RRSPs, and TFSAs) offered families greater flexibility and often higher returns than whole life insurance.​

• Critics and financial advisors increasingly highlighted the higher costs and complexity of whole life products versus lower-cost term insurance combined with separate, direct investments.​

Is it still relevant in today’s society? Yes. Especially when designed to accelerate the cash value growth in the later years of the policy to combat inflation and address passive income.

Today, we can design policies to be so efficient they can be used as a personal banking system. They are capable of holding vast amounts of wealth, and grow that wealth, guaranteed, while allowing access to policy loans.

When designed and used correctly, your kids will never have to walk into a bank to access money. Your family banking system will be capitalized effectively to handle all of their needs. Every dollar you borrow, then subsequently pay back, is available to the next generation. All while maintaining incredible tax efficiency. Is there any other wealth building tool available out in the market that can do this?