That is an excellent question! I am very hesitant to use the word investment when talking about life insurance in any sense, as it isn't designed to be like the stock market or mutual funds, where you invest a lump sum, and gain or lose off the investments' growth. With life insurance, you make a steady payment, the premium, and the return for that payment is clearly defined: the face value, or death benefit.
That said, it is a very common event that the amount of premiums paid are far less than the payout when it happens, but the insured isn't there to gain from it, as it only pays out when they pass.
I'd say that they are theoretically more like a savings account than an investment, as they are an excellent way to get cash when it might otherwise not be loaned to you. You can borrow out of the accumulated premiums that you have paid in. Another way that it will be a smart financial move for your children is that purchased as children, you lock in a very inexpensive price for the policy, that will never change. From that respect, you can save them a ton of money over the years from what they would have paid, purchased later in life, with health issues. Many companies will also allow for periodic increases in the amount of insurance without questions, a godsend if the child has developed issues with their health. I'd love to discuss this with you privately, please contact me. Thanks for asking!
President, Lane Independent Agency, Southern California
I never call Whole Life an Investment, because it has an entirely different purpose, but it is a TOOL! A financial tool that pays off in many ways. For a kid, it is probably the very best financial tool you can ever have. It guarantees that for the life of that child, they will always have life insurance, so long as premiums are paid. They do not have to worry about ever becoming uninsurable, such as with diabetes or obesity, or heart ailment, cancer, or any other reason on earth. They are insured! Their premiums will NEVER ever go up. They are locked in for the entire life, no matter what happens. As a kid, their rates are extremely low, so low they can be incredible. Every parent or grandparent should get life insurance on their children or grand kids. Love to help. Thank you. GARY LANE.
Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
Insurance as an investment is a topic that has been debated for a long time. A whole life insurance policy on a child makes good sense if you care about providing a base of insurance that will last a lifetime regardless of your child’s future health or occupation. It makes good sense if you want to establish a savings program that has safety and a reasonable return. It also makes good sense if you want to guarantee that your child will be able to get life insurance in the future regardless of their occupation or health.
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That said, it is a very common event that the amount of premiums paid are far less than the payout when it happens, but the insured isn't there to gain from it, as it only pays out when they pass.
I'd say that they are theoretically more like a savings account than an investment, as they are an excellent way to get cash when it might otherwise not be loaned to you. You can borrow out of the accumulated premiums that you have paid in. Another way that it will be a smart financial move for your children is that purchased as children, you lock in a very inexpensive price for the policy, that will never change. From that respect, you can save them a ton of money over the years from what they would have paid, purchased later in life, with health issues. Many companies will also allow for periodic increases in the amount of insurance without questions, a godsend if the child has developed issues with their health. I'd love to discuss this with you privately, please contact me. Thanks for asking!