• Whole life insurance is a permanent life insurance product that features a guaranteed level death benefit and guaranteed level premiums. This type of insurance accumulates cash value at a guaranteed rate. If the insurance company is mutually owned, as opposed to being owned by stockholders, the company may credit a share of profits to the whole life policy in the form of dividends. The cash value is guaranteed never to decline, regardless of market conditions. And policyowners can borrow against the cash value for any reason.
  
  

Tax-Free Permanent Death Benefit

• The key feature of any life insurance policy is the tax-free death benefit. This benefit is frequently used to fund a buy-sell agreement between partners, guaranteeing the deceased partner's heirs that the surviving partners will have enough liquidity to buy out the deceased partner's share of the business for cash. Other uses include insuring key people, such as salespeople or key executives. If the insured should die, the business would get cash to use to search for, hire and train a replacement.
  
  

Tax-Free Accumulation

• Generally, the cash value buildup within a whole life policy is tax free. While the company pays premiums with after-tax dollars, the proceeds in the policy are generally never taxed again. This may allow the company to accumulate cash reserves at a better after-tax interest rate than it could get in a CD, money market or similar conservative savings vehicle.
  
  

Tax-Free Cash

• Policyowners can borrow against their life insurance policies tax free and use the proceeds for any reason they wish. There's no credit check --- the death benefit is the security for the loan, and the death benefit is eventually certain. The policyowner can choose to pay the policy back, with interest, or let the loan accumulate at interest until the insured dies, at which point the insurance company simply pays the death benefit, less the loan balance.
  
  

Asset Protection

• Many states provide some protection for cash value in life insurance against seizure by creditors in the case of bankruptcy. This could be important in case the business is ever sued and liquidated by creditors.
  
  

Waiver of Premium

• Whole life insurance frequently comes with a rider that guarantees that the company will pay premiums if the insured should become disabled. This means that in the event of a disability, not only will the death benefit remain in force, but the cash accumulation portion of the policy will self-complete. No other cash accumulation or investment vehicle does this.
  
  

Golden Handcuffs

• Companies can use whole life or universal life insurance to provide an incentive for a valuable employee to stay with the company. If the employee stays a given number of years, the company can provide him with a bonus from the cash value of the policy. If the employee leaves, the company can keep the cash value or transfer the policy to cover a new employee, depending on the new employee's health.
  
  

Premium Offset

• Eventually, the interest and dividends on a whole life policy may be enough to pay the entire premium --- a condition known as "premium offset." The policy will continue to grow, tax free, as long as the insured remains alive. If the policy receives dividends, the death benefit increase over time, too. Some companies guarantee a policy will be fully paid up in a certain number of years, with no more premiums due.