The classic answer? It is not an investment; it is insurance. However, some financial heavyweights are saying that times have changed and the stock market has underperformed. They are recommending that their clients have up to 10% of their portfolio in life insurance.

Check out this interview with Joe Heider, Dawson Wealth Management and Adam Sherman, Firstrust Financial Resources:

CNBC's Dennis Kneale & Sue Herera: Finding a decent return in life insurance (c) CNBCVideo Media

You should know that this advice is meant for wealthy clients looking to diversify a portion of their portfolios away from stocks. The advice for most people is still to use term insurance for most situations. Suze Orman is quite emphatic on this point, as you can see here: Suze Orman on Life Insurance.

There are a couple of other situations where whole life insurance is used in financial planning: estate planning and gifting. Estate planning uses life insurance as a vehicle to pay estate taxes when the insured person dies. This is useful for people whose estates exceed the federal exclusion. Gifting is used by those who wish to leave behind a "gift" for a loved one or a favorite charity. This is useful for anybody, not just the wealthy, as long as they can afford the premiums.

Estate Planning When a married couple plans their estate properly, the amount below the federal exclusion is passed to the next generation tax free. With an estate less than the federal exclusion, life insurance can be used to create a larger estate.

Once an estate reaches the federal exclusion amount (currently $3,500,000), there is an estate tax due after a husband and wife die. This tax depends on the size of the estate, and goes up to 55% of the estate being passed to the next generation.

A type of insurance called "second to die" life insurance was created to cover this type of need. Since the tax is not due until the second death, the insurance is not payable until then. The insurance is usually owned by a trust, or adult children, to keep the proceeds out of the estate.

Permanent (whole or universal) life insurance is appropriate for estate planning, because the coverage is needed specifically at the person's death, not for some specific term. Term life insurance is appropriate when the need for the coverage goes away at some pre-determined time.

Gifting is used by someone who wishes to leave behind a "gift" for a loved one or a favorite charity. The gift is the face amount of the life insurance policy, and it is tax free to the recipient. The face amount is often less than the sum of the premiums needed to keep the policy in force.

Here is an example for a 70 year old woman in excellent health who wishes to leave a gift of $100,000 to her children. Permanent insurance is used because the coverage is required specifically at death, not during some pre-determined time period. The lowest premium for this example is $2,009 per year with John Hancock Life Insurance Company.

If the woman lives to age 84, she will have paid out $28,126 in premiums to obtain the gift of $100,000 for her children. If she lives to age 94, she will have paid out $48,216. If she lives to age 100, she will have paid out $60,270, which is the maximum amount payable. That's because payments for permanent insurance cease at age 100, even though "free" coverage extends beyond age 100.