• Rick Gillit

Life Insurance As An Investment?

Updated: Dec 28, 2018

You have probably been approached about using life insurance as an investment tool. Some of the most wealthy men and women in the world have used life insurance as an investment and not just an investment they leave to their families. In fact, Disneyland may have never became a reality if it weren't for Walt Disney's access to emergency funds through his life insurance. The last couple posts we have talked purely about term insurance, but should you also consider whole life insurance?

Many people choose term insurance because it is the cheapest option 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 іn 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. One option is to buy term and invest the difference? If you are a disciplined investor this could work for you, but you also must consider if this is 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. 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 or whatever the specified age. These policies are the highest priced life insurance policies but they have a guaranteed cash value. When the whole life policy accumulates over time it builds cash value that can be borrowed by the owner. The whole life policy can have substantial cash value after a period of 15 to 20 years and many investors have taken notice of this. After a period of time, (20 years usually), the whole life insurance policy can become paid up which means you now have insurance and don't have to pay anymore, but the cash value continues to build. This is a unique part of the whole life policy. Life insurance should not be considered solely because of the cash value accumulation but in periods of extreme monetary needs, you don't need to borrow from a third party because you can borrow from your life insurance policy in case of an emergency.

There are many different whole life or permanent life insurance policies and several optional riders that may be added to your policy for a variety of reasons, but the best way to look at the difference in cash values is to have your insurance agent show you illustrations so you can see that fits your investment profile.

Don't hesitate to call your local trusted insurance agents in Highlands Ranch and Castle Rock to determine what policy is the best decision for your situation call us at 303-779-4200 or visit our page on Life Insurance.

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