Many people have been approached about using life insurance cover as an investment tool. Do you really believe that life insurance is basically an asset or do you find it as a liability? Life insurance is one of the best means to protect your family. However, the question here is if you should be opting for permanent insurance or term insurance?
Why People Choose Term Insurance?
Many people opt for term insurance cover as it is the cheapest and provides cover for a certain period of time like 5, 10, 15, 20 or even 30 years. People tend to live longer so term insurance perhaps not always be the best investment tool for everyone. If an individual chooses 30 years of term insurance option they have the longest cover period but that would be recommended for someone in their 20’s as if a 25 year old opts for a 30 years term policy then the term would end as they turn 55.
When an individual who is 55 years old and enjoys great health opts for life insurance, then the cost of insurance for a 55 year old will get very expensive. Would you prefer buying term insurance and invest the difference? If you happen to be a disciplined investor then this technique could work well for you but is it really the best approach to pass assets to your heirs and that also tax free? If an individual dies during the 30 years term then the beneficiaries would be getting the face amount tax free. If your investments other than the life insurance are passed to beneficiaries, in most cases, the savings will not pass tax free to the beneficiaries. Term insurance cover is considered as a temporary insurance cover and can be helpful when an individual is starting out their life. Several term policies have a conversion option to permanent policy in case the insured feels that they may require it in the near future.
Whole Life Insurance Cover – Another Viable Option
One other type of policy is the whole life insurance. As the policy states, it is a viable option for your while life until age 100. This type of life insurance cover is being phased out of several life insurance companies. The whole life insurance cover is called as the permanent life insurance because as long as the premiums are being paid, the insured will have the cover until age 100. Such policies are the highest priced insurance cover but they do offer guaranteed cash values. As the permanent life insurance policy accumulates over the period of time, it builds cash value that can be borrowed by the owner. This policy offers a considerable cash value after a time frame of 15 to 20 years and several investors out there have taken notice of it. After a certain period of time, 20 years generally, the permanent insurance cover gets paid up which means that you now have insurance and do not have to pay more and the cash value continues to grow. This is an exclusive aspect of the permanent insurance cover that other types of insurance policies just cannot offer. Life insurance should not be sold as it has cash value accumulation but in times when you are stuck with financial emergencies you do not have to borrow funds from a third part because you can easily borrow from your own life insurance. Check out more at lifenetinsurance.com
Universal Life Insurance Policies
In the era of late 80s and 90s, insurance companies even sold policies called as the universal life insurance policies which offered insurance cover for life. The fact was that such type of insurance policies were very poorly designed and most of them lapsed as the interest rates lowered and the policies could not perform well and the consumers were forced to send added premiums and if not the policy would laps.
The universal life insurance policies were a hybrid form of term and permanent insurance policies. Some of the policies were even tied to the stock market and were called as the variable universal life insurance policies. The fact of the matter is that these variable policies should only be bought by investors who tend to have a high risk tolerance. As the stock market goes down the policy owner may lose big and be compelled to send in additional premiums to cover their losses or the policy would terminate or lapse right away.
The structure of the universal policy has had major alterations for the better in the recent years. Universal policies are the permanent life insurance policies that range in age limits as high as 120 years. Several insurance providers now sell primarily term and universal life policies. The Universal policies usually have a target premium which assures that as long as the premiums are paid the policy will not fail.