A couple in their 60s asked me whether they were too old to open an IUL, which means indexed universal life, or whether an annuity would serve them better. They didn't need income. They wanted to leave money to their family. Their question got its own video, whether an annuity beats an IUL for leaving a legacy, and my answer pointed them toward whole life instead of either one.
An annuity is a contract with an insurance company that turns money into a stream of payments. It's built to pay you while you're alive. If you die with money still in it, your beneficiary usually gets the remaining account value. It doesn't grow into a multiple of what you put in. On an annuity bought with money you'd already paid tax on, the growth above what you put in is generally taxed as ordinary income to whoever inherits it.
Life insurance works the other way around. The death benefit, which means the amount the policy pays when you die, starts out as a multiple of what you've paid in, and it generally goes to your beneficiaries free of income tax. A named beneficiary also gets paid directly, without waiting on probate.
So why whole life over an IUL? An IUL charges for the insurance every month you own it, and that cost of insurance climbs as you get older. If the policy isn't credited enough to keep up, the usual fix is lowering the death benefit, which works against the whole reason you bought it. Whole life can be funded with a set amount for a set number of years and then turned off, so no more premium is due and there's no ongoing insurance charge to cover. The IUL has more room to grow. For a couple whose main goal is what the kids receive, I'd take the whole life guarantee.
A whole life policy designed for high early cash value does its main job from the first day. The death benefit is there as soon as the policy is in force, and once the premiums stop, the dividends keep buying more paid-up insurance, which pushes the death benefit higher over time. Dividends aren't guaranteed, and the illustrated numbers are projections. In your 60s, health matters too: the price depends on what underwriting finds, and some people won't qualify at all.
Annuities still have a job, which is paying income you can't outlive, and some of my clients own both. Guaranteed income from an annuity can cover the monthly bills, which frees other money to go into a policy for the kids. Some annuities also sell a rider that raises the death benefit for an added yearly cost. Price that rider against a life insurance policy before you buy it.
A policy you own also counts toward your estate. Right now, Oregon taxes estates above $1 million, which a house, a retirement account, and a policy can pass together, as explained in Oregon's $1 million estate tax threshold. If your estate is anywhere close to that, talk to an estate attorney about who should own the policy. I'm a licensed insurance broker, not an attorney or a tax advisor.
Start with the amount you'd like your kids to receive, then ask how many years of premium it would take to reach it at your age, using only the guaranteed column.