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Life insurance as an investment tool

life insurance

Whether life insurance is an investment or a liability remains a controversial question that depends on how we see it. Most would agree however that acquiring a life insurance is a sure way of transferring assets to your heirs; tax free, in efforts to protecting them when you are gone. The terms in the life insurance are often dictated by the choice of life insurance you adopt; whether term insurance or permanent insurance whose major difference is the cost and time validity.

Term insurance is relatively cheap but extends from 5-30 years unlike permanent life insurance that remains valid as long as the premiums are paid for. On the other hand, permanent insurance policies are very expensive but have guaranteed premiums. Besides, once the entire life policy has accumulated over time, the built cash value can be borrowed by the owner, serving as a best alternative to seek borrowed money in case of an emergency.

Another benefit with permanent insurance is that substantial funds may accumulate after some time say 20 years where all the whole life insurance will have been paid enabling the owner to stop further payments, yet their cash value continues to build.

The universal life policies that are a hybrid of term insurance and the permanent life insurance are not popular since they are dependent on stock markets forcing agents to add more money on their premiums once the stock market goes down, else their policies are terminated. Owing this challenge, they have been improved today, to encompass ages as high as 120 years alongside having guaranteed premiums as long as they are paid for. The index universal life policy is one form of universal policy which is tied to S & P index, Russell Index and the Dow Jones which ensures they have limited gains but again, no losses in case the index market falls.

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