When you’re trying to find the best investments to make, life insurance probably comes into that list somewhere. You’ve heard great things from your friends about the policy they found or you’ve heard the words thrown around enough that you’re just curious to know more about your options. A life insurance investment could make a huge difference in the long run for you and your family, so it’s definitely something to consider if you can. A term life insurance investment is generally the best option for more policyholders because it’s the least expensive type there is out there which means that it leaves money freed up that can be invested elsewhere. A permanent life insurance investment is the other most common type, but it’s not as affordable as the term life insurance investment option. With a permanent life insurance investment, you can accumulate a cash value that’s not possible with term life insurance. The expense comes in when you have to calculate all of the management fees and commissions that will indefinitely come into play. Both options have their ups and downs, so it’s important for you to find out which option will best serve you and your family in the long run.
When You Take the Permanent Life Insurance Investment
The truth is that most of the benefits generally associated with a permanent life insurance investment are exclusive to this kind of policy. In most cases, there are ways for you to get around paying the exorbitant management fees and commissions while still getting the most out of your policy. Here are some things you can look forward to with the permanent plan:
- You get tax-deferred growth. Because there’s the cash value perk that comes into play with the permanent investment, you don’t pay taxes on interest or capital gains until you choose to make a withdrawal. This benefit can also be achieved by simply investing in the right retirement account though: like the IRA or self-employed 401(k) plan. Only if you meet the maximum contributions on these accounts year after year should you really begin to consider the permanent life insurance investment.
- You can keep your policy “forever” as long as you keep up with your premium payments. You won’t lose coverage over time with the permanent life insurance option like you would with a term life insurance plan. Term policies last for a certain amount of time and when those terms have been met at around age 65 for most people, the policy comes to an end. That leaves quite a few decades in the void if you were to live to be at least 100 and it’s probably a sure thing that there will be someone who needs your death benefits.
- You can borrow against your cash value for big purchases. If you want to buy a new home or send one of your brood off to an institution of higher learning, you can borrow against your cash value without paying taxes or extra fees. There are quite a few loops you’ll have to go through to use this benefit, and it’s probably not the most advantageous way to buy a home or send a child to college. You could end up paying more in taxes and fees in the long run by swinging for this option. Your retirement savings shouldn’t really be touched for anything other than retirement spending because you could end up digging yourself into a very deep hole.
- You can use funds to cover the balances on medical expenses if you were to fall ill. This can be great if you come down with a chronic or terminal illness because you wouldn’t have to worry about watching your checkings or savings account earnings dwindle away. This could improve your quality of life and allow you to have it easy before you pass on. The downside with this is that your beneficiary will receive less benefit when it comes time to file a claim.
Springing for Term Life Insurance Instead
When you decide to go with the term life insurance option, all of the premiums you pay go toward the death benefit that your beneficiary will be granted. There’s no investment perk to term life insurance because it doesn’t build cash value. If you think about a term life insurance investment in the sense that you’re paying fairly affordable premiums to provide for a much more substantial death benefit for your beneficiary, the value of this option becomes very apparent. The returns on term life insurance policies are very suitable when compared to the low costs associated with premiums. Even if your term ended before your death, you could be thankful for the fact that you paid very little to have peace of mind and you didn’t even have to worry about it.
Depending on the type of investment you want to make, one of these choices stands out as the best one!