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Would it be Smart to Buy Life Insurance as a Form of Investment?

When talking about investment, one of the options that you might like to take into account is life insurance. If you do consider such, then you need to know its two categories which are the:

  1. Permanent Life Insurance and Term Life Insurance
  2. Term Life Insurance

In relation to permanent life insurance, it enables the policyholder to amass cash value. Something that term life insurance doesn’t offer. While you could accumulate amount with permanent life insurance, it is typically associated with higher fees and not to mention, agent commissions. If you would take time to talk to a financial advisor, the majority of them will agree that these charges are only a waste of money.

 

Be Cautious

 

As you hear more about what financial advisers say, life insurance agents who advocate life insurance as investment, they’re basically referring to cash value component of permanent life insurance and several ways that you could invest and borrow the money.

But when does it really make sense to invest to life insurance in such way and when would it be best to buy term life insurance and invest the difference instead? On that note, let us dig deeper into this matter and check at some of the most popular arguments regarding these types of life insurance.

 

Term vs. Permanent

 

By using permanent life insurance as form of investment, you will be free from paying taxes. But this is only until you’ve withdrawn the money. Additionally, you can hold onto the policy until 120 years old. Of course, this is so long as you’re paying the premiums right on time.

When you opted to term life insurance, all payments will be put towards death benefit for the beneficiaries. However, there is no cash value and thus, there’s no investment component in it.

 

Meaning to say, you are paying the small premiums all in exchange of a larger death benefit for the family you’ll left behind.

 

Why not Crypto?

 

If you’re not interested into this form of investment, then try other options like using the best tradelines for sale in growing your cryptocurrency. This is actually a hot thing today. With further research, you’ll discover a whole bunch of promising benefits and perks of making an investment in such.

Traditional or Variable Life Insurance, Which Investment Type To Take?

What insurance plan fits your financial criteria, your lifestyle and your tolerance to risk. Let’s take a look at the difference between traditional and variable life insurance to help you make a choice.

 

 

Traditional life insurance

 

  • Samples of traditional life insurance include Term or Temporary and Permanent (Whole Life, Endowment) life insurance. 
  • Provides higher level savings within a specific number of years or it could also be throughout the whole life.
  • It coulda offer dividends and guaranteed cash values for participating policies.
  • No changes can be done nor it is allowed to add premiums in order to raise benefit upon maturity.
  • At the start of the policy, certain protection and death benefits are stipulated and well defined. 
  • Do not incur investment highs and lows on returns and death benefits are assured with an exception to the dividends component.

 

Variable life insurance and investments

 

Forms of variable investments include fixed income securities such as the following:

 

  • cash deposits
  • corporate bonds (debenture, secured, convertible)
  • government bonds (T-bills/T-bonds), 
  • onshore accounts
  • shares/equities
  • common trust funds
  • unit investment trust fund
  • mutual funds
  • real estate. 

 

These forms of investment are more suitable for those who have the tolerance to medium to high risks. It is ideal for those who can take risks and manage slight fluctuations in their investment and policy.

 

Variable life insurance offers a possibility for bigger returns however the risk is high because of volatility in the market. Thus, return on investments is not assured and depends heavily on the market price movements. 

 

Want to know more about variable life insurance? Still confused on which investment type to take? Talk to an experienced financial advisor now to give you the pros and cons of each insurance and investment type.