There are a number of different Whole Life policies. From a Life Settlement standpoint, those with a Convertible Term Rider may have the best chance. Some Whole Life policies last until age 120, and that can be important when the Insured might live beyond 100. Other Whole Life policies are paid up much sooner, including Single Premium Whole Life.
About 25% of Whole Life policies are called “Participating” and at the end of the fiscal year the carrier pays what it calls “dividends.” These are in fact partial refunds of premium overcharges. For that reason, there is no taxation of “life insurance dividends” because Policy Owners are just getting some of their own money back. They are not earnings, as received by some holders of common stock. The issue of life insurance “dividends” was resolved in the 1911 Treasury Decision 1743 by Hon. Royal E. Cabell, Commissioner of Internal Revenue. In that Decision, life insurance “dividends” were allowed as a marketing tool. In a somewhat similar fashion, those who over-withhold from their paychecks get some of their own money back after they file their taxes.