Why the Wealthy Use Whole Life Insurance (and Why You Might Want To, Too)

What comes to mind when you hear the words “whole life insurance? You may think something along the lines of, “What a horrible investment — just another sales pitch.”

But that’s only half the story.

By understanding how policies actually work, they stop looking like weak investments and become powerful financial foundations-the kind that the wealthy rely on quietly.

Caleb Guilliams, founder and CEO of BetterWealth, a financial education and wealth-building company, excels at explaining how this works. Using whole-life insurance as a strategic tool, he helps entrepreneurs and high-income earners gain liquidity, tax benefits, and long-term security. He has also written “The AND Asset,” which explains how to maximize life insurance efficiency.

Here, Caleb will explain life insurance, wealth strategy, and why the smartest investors use it — not instead of investing, but alongside it.

The Wake-Up Call Most People Miss

Caleb’s journey into financial education began in an unlikely place: gutting chickens for a dollar each in a small Wisconsin town. Having saved money and worked hard, he landed a job at a local bank at the age of 17. At just 19, he managed 300 investment clients.

Caleb admits that he didn’t know everything at the time. But people could tell he cared. That made all the difference.

As a result of that early experience, he’s developed a wealth-building philosophy based on principles, rather than fancy products. And one of those principles is understanding what your money is doing for you.

At 21, he launched BetterWealth from the basement of a Papa John’s restaurant. He now serves clients in all 50 states after just a few years.

Why Life Insurance Isn’t an “Investment”

According to Caleb, here’s where most people get tripped up.

Whenever you hear the word “life insurance,” you probably think of the death benefit your family receives after you pass away. You may have heard about “whole life” policies that offer low returns and high fees.

Although both are partially true, they miss the bigger picture.

According to Caleb, when he thinks of an investment, he thinks of something with both upside and downside. This risk isn’t present in properly structured life insurance.

There’s an important distinction here: life insurance doesn’t replace your investments; it protects and empowers them.

It’s like your iPhone. Besides being a phone, it’s a camera, calculator, GPS, and notepad all rolled into one. The same is true for a properly designed whole life insurance policy; it’s a financial tool you can use, grow, and protect all at once.

The Fixed-Income Backbone of the Wealthy

I study how ultra-wealthy portfolios are structured at The Lifestyle Investor. There’s one pattern that stands out: they diversify beyond asset classes into purposes as well.

In most cases, billionaires and centimillionaires invest 5–15% of their net worth in fixed-income assets like bonds, treasuries, and life insurance.

Why? These assets provide stability, liquidity, and protection.

When you factor in tax advantages, whole life typically earns a 4–6% internal rate of return. With a life insurance policy, growth can be deferred, withdrawals can be tax-free through policy loans, and the death benefit is income tax-free upon death.

As a result, when taxes are taken into account, that 4–6% behaves more like 6–9%. And unlike your 401(k) or stock portfolio, there is no market risk or volatility.

Using Life Insurance Like the Wealthy Do

Here’s where things get really interesting.

If your policy has cash value, you can borrow against it while your money continues to compound.

It’s this strategy that the wealthy use to generate multiple streams of revenue from a single dollar.

Let’s say your policy earns 5%. Without interrupting the compounding inside your policy, you can borrow money to invest in a private deal, buy real estate, or fund your business.

That’s the “AND” strategy Caleb talks about. There’s no choice between saving and investing. You’re doing both.

The idea is simple, but this time, you’re the bank, not the bank’s customer.

Why Whole Life Insurance Is More Secure Than a Bank

As I often tell my Lifestyle Investor community, most banks are far more risky than people realize.

Banking is based on fractional reserve lending, meaning that banks only hold a fraction of deposits on hand. The system may crash if too many people withdraw at once. In recent years, we have seen multiple bank failures.

The opposite is true for life insurance companies. By law, they must keep 100% of their reserves available to cover claims. If every policyholder demanded their money today, these companies could pay out and still have money left over.

Unlike high-yield savings accounts, you can park cash safely here and rest easy knowing it’s protected.

The Real Benefits of Whole Life (When Done Right)

Why is this strategy so powerful? Let’s break it down:

Guaranteed growth and protection.

Over time, your cash value grows steadily, typically earning 4–6%. There are no market swings; it’s predictable and tax-advantaged. Furthermore, you’re building a death benefit that increases with age—a valuable asset that is often underestimated.

Liquidity and control.

Unlike retirement accounts, you can access your cash value at any time. It’s your money. If you want, you can withdraw the funds or, even better, borrow against them while your money compounds.

Optionality in retirement.

Having a whole life policy creates flexibility. Having a guaranteed death benefit or cash reserves gives you greater confidence in spending down your other assets. Financially and emotionally, it’s freedom.

Protection from creditors and lawsuits.

Life insurance assets are generally protected from creditors in most states. Whether you’re a business owner, real estate investor, or entrepreneur, that’s a huge advantage.

Estate planning and legacy.

Among the most efficient legacy tools, the death benefit transfers income-tax-free. Furthermore, if certain conditions arise, you can even utilize your death benefit while alive with options like chronic illness riders.

The Drawbacks (and What to Watch Out For)

To be clear, not all life insurance policies are created equal.

A majority of off-the-shelf policies are garbage, according to Caleb. Rather than maximizing your performance, they maximize the agent’s commission. Moreover, most agents do not know how to build client-friendly policies.

Here’s what to watch out for:

• Overfunded only for whole life. Instead of maximizing commissions, policies should maximize cash value.
• Avoid Universal Life variants. There is an unnecessary risk and complexity associated with index or variable life insurance policies.
• Long-term mindset required. It takes a few years for cash value to build. It takes decades to play out a life.
• Choose a strong mutual company. Select carriers with over 100 years of dividend history and solid financial ratings.

If it’s done right, life insurance is the foundation for all of your financial goals.

The “AND” Mindset

What I love most about Caleb’s philosophy is that it aligns perfectly with The Lifestyle Investor’s principles.

It’s not an either/or situation. It’s all about and.

• You can protect your downside and create upside.
• You can grow wealth and access liquidity.
• You can enjoy life today and secure your legacy for tomorrow.

Caleb explains that if you have upside potential, you should build a stronger foundation.

When appropriately structured, whole life insurance provides that foundation. It’s not always flashy. It isn’t speculative. However, it gives you the peace of mind, liquidity, and flexibility you require to live a truly free lifestyle.

Final Thoughts

One thing is certain when I study how successful investors operate: they play both offense and defense.

Rather than chasing the highest returns, they build systems that keep their money safe, efficient, and available when opportunity arises.

For many of them, whole life insurance is part of that system. You’re not buying a policy; you’re buying control.

In other words, the more control you have over your capital, the more control you have over your lifestyle. And that’s what The Lifestyle Investor is all about.

Key Takeaways

• A whole life insurance policy isn’t just insurance — it’s a financial tool. In the right circumstances, whole life insurance serves more than just as a death benefit. With this asset class, you can build wealth while keeping taxes low and have predictable growth without fear of market volatility.
• Wealthy people use it to control their money, not lock it away. In place of waiting for traditional lenders to respond to opportunities, high-net-worth individuals use policies as their own “personal bank.”
• Leverage + liquidity = long-term freedom. It’s possible to keep your money compounding while using it elsewhere by borrowing against the policy’s cash value.
• There is a hidden advantage to tax efficiency. When high earners want to reduce their taxable income and preserve their wealth, whole life insurance can offer tax-deferred growth and tax-free access to loans.
• You should consider it as a complement to investing, not as a replacement. The most savvy investors use both stocks and whole life insurance. Stability and liquidity are provided by insurance, while investments offer growth and opportunity.

Featured Image Credit: Andrea Piacquadio; Pexels: Thank you!