Life Insurance as an Investment: 3 Things You Need to Keep in Mind

Some people think insurance and investment are two different things. They don’t have to be. Here’s what you need to know about life insurance as an investment.

Over 40 percent of Americans don’t have a life insurance policy. But, 84% of Americans say that they believe most people should have life insurance. 

So why the discrepancy? Most people believe that their money could be going to what they perceive as more important things, like investments. But, what most people don’t realize is that life insurance and investments aren’t two different things. 

Keep reading to discover everything you need to know about life insurance as an investment.

  1. Receive Tax-Deferred Growth

At this point, you may be asking, “how is life insurance a good investment?”. Why is this any different than investing the money into a traditional savings account?

The main difference between a whole life insurance policy and other investing strategies is that it receives tax-deferred growth

With these policies, you don’t pay taxes upfront or on any interest or capital gains received by the policy. Instead, you or your benefactors will pay all the taxes when the policy is eventually cashed out. 

To get the fill earning potential from this benefit, aim to max out your life insurance contributions each year. That way you’re receiving the maximum tax-deferred growth possible. 

  1. Diversify Your Financial Portfolio

A life insurance policy allows you to diversify your financial portfolio. That’s because permanent life insurance policies have high cash value with low risk. 

But what benefits does this allow? Once you’ve invested in your policy, you have the ability to borrow against its cash value.

You can use this cash value to help purchase a home, fund your children’s college, or any other worthy investment. All without paying any penalties or taxes, like you would if you were to withdraw from your retirement plan early. 

  1. Policy Can Remain Active Until You’re 120

So what’s the difference between investing in a term vs. whole life insurance policy?

With a term life policy, the benefits are only received when you die and can’t be used for their cash value. In addition, you purchase these policies for a “term” of time, such as 15 or 30 years. If you die after the policy term expires, your family receives no money despite your years of investment. 

With a whole life insurance policy, the policy remains active for as long as you’re alive, up to 120 years. You won’t lose this coverage of the investments within the policy merely because you lived a long and healthy life. 

Consider Life Insurance as an Investment

Now that you’ve read this article, you have enough information to start considering life insurance as an investment.

A permanent life insurance policy allows you to receive tax-deferred growth. Through this policy, you can diversify your financial portfolio and the policy can remain active until you’re 120 years old. But let’s not forget the greatest aspect of life insurance — you’re financially protecting your family in the event of your death. 

Looking for more innovative ways to invest your wealth and leave a better financial future for your family? If so, visit the Investing Wisely section of this site.

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