Life Insurance Investment Pros and Cons
There is always the question of whether investing in a life insurance policy is a worthy endeavor.
In this debate, the most common is usually the Whole Life Insurance.
This is a policy that guarantees you coverage throughout your life, as long as you keep your premium payments current.
The costs or premiums do not increase at any point in time. You also get living benefits from the policy and guaranteed growth of your cash value. So, what are the merits and demerits?
Pros of Whole Life Insurance
The merits of Whole Life Insurance are:
- The premiums of this policy are guaranteed for life: What you pay for the first month is what you will still be paying ten years down the line. Other types of insurance policies do not offer the same fixed premiums. The next best thing is term insurance, but the premiums of this policy change from one term to the next.
- This is a permanent insurance policy that stays in place as long as you pay the premiums: Your beneficiaries are guaranteed the benefits no matter what time you kick the bucket. This is advantageous if you end up suffering an untimely death. A term policy does not offer the same sort of guarantee. If by any chance you die even a day before the policy ends, your beneficiaries will receive nothing at all.
- The premiums and benefits of this policy are fully guaranteed: Not may policies guaranteed death benefits or have constant premiums. This type of life insurance policy has the most guarantees.
Upon cancellation of the policy, your cash value is returned to you.
You thus have evidence and a consolation prize when you exit your policy.
Cons of Whole Life Insurance
The demerits of Whole Life Insurance include:
- It is complex: Whole Life Insurance has quite the collection of features. This makes it a more complex policy compared to term life. This makes it a really complex life insurance policy that you will need to thoroughly asses before signing up for. Think of it as owning a building or renting. Renting is easy, takes less time and leaves you with little to consider. However, owning is a complex process involving a lot of moving parts and it takes time to do it right. With the Whole Life Insurance, you own your policy for life. It is yours until the day you breathe your last.
- Higher premiums: Due to the nature of the benefits and the guarantees, this type of life insurance generally has higher premium compared to the rest. However, in time, the other policies tend to get more expensive.
- Some risk is involved: Just because the growth of your whole cash value is guaranteed, doesn’t mean that you will get higher returns. In some cases, this growth tends to be less that than the growth of investments that don’t come with a similar guarantee. It’s all about risk and reward.
Consider the pros and the cons fully and wee whether it is worth for you to invest your money in a Whole Life Insurance or not. This is a big decision that requires all the consideration that you can give it.