Is Life Insurance a Good Investment?
Often clients come in with various investment products sold to them by “life insurance experts” that, had they been more informed, they would not have purchased. When an agent is in selling-mode, it can be difficult to discern the truth from the fluff. So, is a life insurance investment a good idea? It depends.
Be wary of absolute “yes” and “no” investment advice, as your situation is unique. Some people get life insurance for their spouse and many wait until they have kids. There are few cases when young, single individuals need life insurance. Still, some “life insurance experts” will try to sell it. They may try to sell you term insurance because of its low cost and affordable rates. Run!
Life insurance can play an important part in a family’s investment portfolio, and it is important to understand that there are different types of life insurance.
Term life insurance is not an investment because there is no buildup in value. Additionally, should the insured outlive the policy – the return is negative 100%!
This article pertains only to traditional cash value whole life insurance, what I will refer to as permanent life insurance. Permanent life insurance is designed to stay in force for life. It has two parts – a cash or investment component and a death benefit component. The sum of these two parts equals the policy. A few important considerations below.
- Policy values are oftentimes guaranteed as long as premiums are paid.
- If structured properly, the policy will stay in force for life and ultimately an income tax free death benefit will be paid to beneficiaries.
- Some life insurance companies allow the use of the death benefit while alive to satisfy long term care needs.
- Permanent life insurance cash values are guaranteed only to increase. Moreover, these annual increases are not subject to income tax or alternative minimum tax.
A life insurance expert is not someone with a specific product to sell or a quota to meet. It is someone who understands the complexity of your unique situation and provides you with options and education that empowers you to plan your investment and retirement holistically. At Park Place Financial, our financial planners create customized, comprehensive financial plans for each client. Our team cares about ensuring you are taken care of in the future and that you are making the best investment decisions for your goals. If you’d like to know more about how life insurance may fit into your portfolio, give us a call or visit our website to schedule a complimentary introductory call or consultation!