You may wonder, Is life insurance a good investment. If so, there are several reasons why it is. While whole life insurance is a hands-off investment, experienced investors may not like to leave all investment decisions to a company’s investment managers. In this case, variable life insurance or a variable universal life policy may be more suitable. Those products, however, offer the highest returns and risk.
Permanent life insurance
A policy containing permanent life insurance has many benefits, but one of the best features is that the cash value accumulates tax-deferred. The cash value in a permanent policy grows based on the interest credited to the account and the performance of the underlying investment options. Another benefit of permanent life insurance is its flexibility. Although the death benefit of a permanent life insurance policy is a large amount of money, it can be used for any purpose, including making loans to the insurer or paying off debt.
Unlike term life insurance, permanent life insurance policies allow the policyholder to access the death benefit while they are still living. The death benefit from permanent life insurance is paid out in the event of a qualifying event. While term life insurance is easy to understand, you may find it difficult to understand the details of the permanent policy. Whether you choose a policy with cash value or a term policy depends on your needs.
Term life insurance
Many people ask: Is term life insurance a good investment? There are many benefits of this type of insurance, including the peace of mind that it brings and the substantial death benefit it offers. A return of premium life insurance policy rewards you for paying your premiums later. Because the insurance policy is for a limited period, the premiums paid in the early years will pay off in the end. However, there are some risks associated with this type of insurance.
Depending on your age and whether you have young children, term life insurance may be a good investment. It pays out a death benefit, usually in the form of a lump sum, to the beneficiaries after you die. Term life insurance can be level, annual renewable, or decreasing term. Many financial planners recommend a term life insurance policy of about 20 years. Depending on the age of your children, this term may be a bit too long, but it can protect your family’s finances.
Whole life insurance
While you may not think of whole life insurance as an investment, this product does accumulate a cash value. This value is tax-advantaged, and never declines in value. Whether you use this money for retirement, paying off credit cards, or other needs, it can add value to your home and financial plan. People invest in assets that help them achieve their goals, and whole life insurance can do the same.
Buying a whole life policy from a mutual company also allows you to benefit from dividends. Many policy owners take dividends and use the money to increase their coverage, resulting in a higher death benefit, greater cash value accumulation, and greater dividend earning potential. You can access the dividends as cash, or use them to pay premiums in the future. However, be aware that accessing cash value reduces your death benefit and available cash surrender value.
Tax-deferred annuity
If you’re approaching retirement and wondering if tax-deferred annuity life insurance makes sense, consider these factors. These investments may offer you a stable stream of income throughout your retirement years. You can also use the funds to fund Individual Retirement Accounts (IRAs) and Keogh-type retirement plans for the self-employed. The type of annuity you choose will determine when benefit payments start.
Another major benefit to annuities is that you can set your own terms. Unlike some other types of insurance, annuities are flexible and offer a variety of options to fit your individual needs. For example, you can tailor your contract to your own needs, or include a death benefit provision so that your heirs will get something when you die. With this flexibility, tax-deferred annuity life insurance is a sound investment. More About