Yes several types of cash value life insurance can be an excellent part of your investment portfolio. Definitely look into the fixed index universal life policies. These policies give you part of the stock market gains by allowing you to pick certain indexes but protect the policy from losing any money when the market drops. The main attraction of having a cash value life insurance plan in your portfolio is being able to draw your retirement funds tax free.
That is a great question! The simple answer is yes, it can be considered an investment in peace of mind, in your family's security, and in your future. Agents are warned to not use the word "investment" when discussing life insurance with you, because of the possibility of leading you to believe that a policy will pay more than the face value that it promises to pay. There are some policies out there that can grow a large cash value, but even those can eventually end up eating that cash value and ending up leaving you with what it promised. A life insurance policy is not designed to make money like the market or bonds would. But it is an essential part of your financial planning, and for your estate planning. If you would like more detail, please contact me, and we'll discuss your question further. Thanks for asking!
President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
Nope. Life insurance cannot be an investment.
Think about this question for a second. What is the most essential element in an investment?
It is time.
Some investments need time to mature. Other investments need time to increase in value.
Example: if you are invested in the stock market, and your investment decreases in value, what should you do? Should you sell? Of course not. You would sustain the loss only if you redeem the shares at a lower price than when you bought them. What you should do is let them ride, and if properly managed, they should recoup their value, and then some. Over time.
If you die, then you could pass this investment on to a family member, and that person could continue to manage the fund. It could continue to grow in value. Over time, during his or her lifetime.
Does life insurance buy you this kind of time? Absolutely not.
The product is designed in just the opposite way. It assumes you will run out of time tomorrow. You get the biggest bang for the buck when a death benefit is paid immediately. Somebody could conceivably buy a policy today, pay one monthly premium, and then die. The beneficiary would receive the entire survivor benefit.
Would you call something an investment if it required no time to realize value? Nope. Or that is guaranteed to pay out, for that matter?
Let’s talk about that guarantee for a second.
Of all the forms of insurance you might buy, the only one you know for sure will pay a benefit is life insurance. This is because you know for sure you are going to die.
You could buy medical insurance, but never get sick. You could buy disability insurance, but never get hurt. You could buy auto insurance, but never have a car accident. You could buy professional liability insurance, but never get sued. You could buy home insurance, but never have a fire.
And on and on.
However, if you hold on to that life insurance policy, you know your survivors will get paid. For sure.
So, life insurance is a uniquely wonderful risk management tool that requires no time at all to realize value, and is absolutely guaranteed. With these characteristics, it meets nobody’s definition of an investment.
Now: I am sure you know that certain life insurance products can produce cash value. Whole life, universal life. Even term can carry a return of premium feature.
But these funds are not to be considered investments. They should be seen as added value. As ways to partially offset your cost. As an extra benefit.
They make the purchase of a policy extra attractive. But you should never assume that they will have time to grow. They will disappear as soon as a claim is filed and a benefit paid.
Regional Marketing Director, Capital Choice Financial Group,
Absolutely not!! Life insurance is no investment and although some agents refer to the cash values accumulated in a cash value policy this is a very bad reference. This occurs more often when describing the cash value buildup in a universal life or variable universal life policy mainly because the interest rate is usually higher than a straight whole life policy. Here's a nugget for you to remember! Never purchase a whole life, universal life, or variable universal life policy and especially because the agent is selling from the rate of return of the "investment" portion of the policy. To the contrary, always purchase a level term policy and really "invest" the savings outside the policy in a mutual fund, either qualified or non-qualified.
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Think about this question for a second. What is the most essential element in an investment?
It is time.
Some investments need time to mature. Other investments need time to increase in value.
Example: if you are invested in the stock market, and your investment decreases in value, what should you do? Should you sell? Of course not. You would sustain the loss only if you redeem the shares at a lower price than when you bought them. What you should do is let them ride, and if properly managed, they should recoup their value, and then some. Over time.
If you die, then you could pass this investment on to a family member, and that person could continue to manage the fund. It could continue to grow in value. Over time, during his or her lifetime.
Does life insurance buy you this kind of time? Absolutely not.
The product is designed in just the opposite way. It assumes you will run out of time tomorrow. You get the biggest bang for the buck when a death benefit is paid immediately. Somebody could conceivably buy a policy today, pay one monthly premium, and then die. The beneficiary would receive the entire survivor benefit.
Would you call something an investment if it required no time to realize value? Nope. Or that is guaranteed to pay out, for that matter?
Let’s talk about that guarantee for a second.
Of all the forms of insurance you might buy, the only one you know for sure will pay a benefit is life insurance. This is because you know for sure you are going to die.
You could buy medical insurance, but never get sick. You could buy disability insurance, but never get hurt. You could buy auto insurance, but never have a car accident. You could buy professional liability insurance, but never get sued. You could buy home insurance, but never have a fire.
And on and on.
However, if you hold on to that life insurance policy, you know your survivors will get paid. For sure.
So, life insurance is a uniquely wonderful risk management tool that requires no time at all to realize value, and is absolutely guaranteed. With these characteristics, it meets nobody’s definition of an investment.
Now: I am sure you know that certain life insurance products can produce cash value. Whole life, universal life. Even term can carry a return of premium feature.
But these funds are not to be considered investments. They should be seen as added value. As ways to partially offset your cost. As an extra benefit.
They make the purchase of a policy extra attractive. But you should never assume that they will have time to grow. They will disappear as soon as a claim is filed and a benefit paid.
And that could be tomorrow.