A lot of people have been approached about using life insurance as an investment tool. Do you believe that life insurance is an asset or a liability? I will discuss life insurance which I think is one of the best ways to protect your family. Do you buy term insurance or permanent insurance is the main question that people should consider?
Many people choose term insurance because it is the cheapest and provides the most coverage for a stated period of time such as 5, 10, 15, 20 or 30 years. People are living longer so term insurance may not always be the best investment for everyone. If a person selects the 30 year term option they have the longest period of coverage but that would not be the best for a person in their 20’s because if a 25 year old selects the 30 year term policy then at age 55 the term would end. When the person who is 55 years old and is still in great health but still needs life insurance the cost of insurance for a 55 year old can get extremely expensive. Do you buy term and invest the difference? If you are a disciplined investor this could work for you but is it the best way to pass assets to your heirs tax free?
If a person dies during the 30 year term period then the beneficiaries would get the face amount tax free. If your investments other than life insurance are passed to beneficiaries, in most cases, the investments will not pass tax free to the beneficiaries. Term insurance is considered temporary insurance and can be beneficial when a person is starting out life. Many term policies have a conversion to a permanent policy if the insured feels the need in the near future,
The next type of policy is whole life insurance. As the policy states it is good for your whole life usually until age 100. This type of policy is being phased out of many life insurance companies. The whole life insurance policy is called permanent life insurance because as long as the premiums are paid the insured will have life insurance until age 100. These policies are the highest priced life insurance policies but they have a guaranteed cash values. When the whole life policy accumulates over time it builds cash value that can be borrowed by the owner.