Tax Benefits of Whole Life
Any money accrued under a whole life policy is not subject to taxation as long as the policy is in effect, and any money you borrow or withdraw up to the amount of the premium is also tax-free. If you cancel the policy at any point, you receive a lump sum of money stored in the cash value account - including interest! You pay taxes only if the cash value plus interest exceeds the sum of premiums paid.
Cancelling (or "surrendering") a policy is a good option for retired persons who have paid off their mortgage and are free of dependents. They can then use the money in other investments--which would provide a stream of income--or spend it as they please.
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