A 4-page special advertising section in the Wall Street Journal yesterday trumpeted “The Resurgence of Whole Life.” The sub-heading read: “As markets waiver, more people turn to cash value life insurance to diversify their investment portfolios.”

I happen to be a believer in high quality, carefully designed whole life type of policies for the right situations, but this conviction is conditioned on some important qualifications explained below. In any case, the claim of a whole life “resurgence” is a gross exaggeration in light of recent statistics from LIMRA (Life Insurance Marketing and Research Association) documenting a substantial decline in overall life insurance sales this year, and a single digit drop in whole life business.

Because the dip in whole life sales was much less than for some other types of policies, especially variable life that typically involves an underlying investment in equities, the claimed resurgence is based simply on the less dire results for whole life.

Anyway, what about whole life and the place that life insurance agents and companies suggest that it should have in one’s portfolio? In fact, the best products from the best companies designed in the most efficient way and owned for the right reasons can make a lot of sense for many people who can afford them.

You’ll note, however, that this last statement is highly qualified. It depends on several conditions: (1) best products; (2) best companies; (3) designed in the most efficient way (i.e., to reduce or even avoid the drag of typical sales commissions and thereby to increase short and long-term cash values and eventual death benefits); (4) owned for the right reasons (i.e., not solely as in investment); and (5) the ability to pay the premiums. Without conditions 1 through 3, you’ll have a poor, or at best mediocre, investment return of the cash value that whole life promoters tout.

Our firm’s website contains similar and more specific advice on how to make whole life insurance a good investment. Under the conditions I’ve mentioned, it can dramatically outperform similar investments on an after-tax, risk-adjusted basis. But you have to know what you’re doing, and the odds of finding that out from anyone in the business of insurance sales are, at best, very remote.