Founder, Abrams Insurance Solutions, Inc., San Diego, CA
If by "investment", you mean something that may gain or lose value, then the only type of life insurance that I would consider an investment is Variable Universal Life (VUL). The interest credited to a VUL policy is based on stocks & bonds and may be positive or negative for the year.
There are other types of life insurance that can accumulate cash called whole life and universal life policies. I consider these savings vehicles rather than investment vehicles because they do not lose money due to a decrease in the stock market or index.
Whole Life insurance accumulates cash by dividends that are declared by the life insurance company.
Universal life, other than VUL, comes in a fixed and an indexed universal life option. The Fixed UL earns interest based on a rate declared by the insurance company. The Indexed option (IUL) earns interest based on the performance of an index such as the S & P. With an IUL, there is usually a floor of 0 - 2% that protects the cash value if the index is negative. The nice thing about an IUL is that you participate in the upside of the market without the downside risk. These are complex products and it is important to speak with a knowledgeable advisor who can educate you on the fees and other particulars.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
An investment needs time to appreciate. Life insurance guarantees values while you wait for other investments to grow. Most investments have upside and downside risks. Life insurance is guaranteed. The stated values will be there when you need them. Investments are a part of the estate of a deceased. Life insurance passes outside probate and goes directly to the person you want to have the money.
That is a great question! I think that there is a lot of confusion about investments and life insurance. Life insurance is a very important part of a healthy financial plan, but should not be considered as an investment in a technical sense. Let me explain it like this: A healthy financial plan is composed of two basic parts - income builders, and protections. Your income builders are hopefully your stocks, 401k's, annuities, bonds, etc. The protectors are your insurances, and emergency savings account. You will not derive any income in most cases from any insurance policy ( There are policies that are hyped as revenue building, but carefully read the fine print, and you will see that often the gains are built on optimistic returns, and large investments on your part, and have a substantial risk attached) as you will no longer be around to receive it. It will provide that income to whomever you chose as your beneficiary. So the only fair way to describe life insurance as an investment is to say that it is an investment in your loved ones' financial safety, and in your peace of mind knowing that you've protected them from harm, even after you've passed. I hope that helps, thanks for asking!
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There are other types of life insurance that can accumulate cash called whole life and universal life policies. I consider these savings vehicles rather than investment vehicles because they do not lose money due to a decrease in the stock market or index.
Whole Life insurance accumulates cash by dividends that are declared by the life insurance company.
Universal life, other than VUL, comes in a fixed and an indexed universal life option. The Fixed UL earns interest based on a rate declared by the insurance company. The Indexed option (IUL) earns interest based on the performance of an index such as the S & P. With an IUL, there is usually a floor of 0 - 2% that protects the cash value if the index is negative. The nice thing about an IUL is that you participate in the upside of the market without the downside risk. These are complex products and it is important to speak with a knowledgeable advisor who can educate you on the fees and other particulars.