Co-Founder, Coastal Financial Partners Group, California
Do not look at life insurance as an investment. First and foremost, the objective is to provide a death benefit at a competitive, level premium. The cash value is a secondary feature which permits a level premium for life. The internal rate of return on the cash value can be projected based on current assumptions and should compare favorably to other long term savings products so i can make sense on this basis.
Life insurance offers protection, income replacement, and the chance to leave a legacy. With life insurance, you are protecting the people you care about the most. Life insurance can also protect the business you own.
There are considerations in contributing to life insurance, first and foremost in client suitability. Permanent life insurance is a long term commitment, with early illiquidity issues. If the policy is kept in force for the life of the insured, there can be substantial tax benefits and positive “ramifications” for Social Security benefit taxation.
There are four permanent life insurance policies to consider based on risk tolerance and long term premium commitments: Participating whole life with maximum term life insurance and paid up addition riders can provide a conservative tax advantaged return based on the portfolio of the life insurance company’s predominate bond holdings. Current assumption universal life also an interest rate crediting method as well. Indexed universal life uses domestic and foreign indices as its primary crediting method. Variable life insurance uses equities and bond allocations to subaccounts and is subject to market losses.
Agent Owner, Gilmore Insurance Services, Marysville, Washington State
why invest in life insurance? Why not? Life insurance is a cornerstone of a financial portfolio offering a safe reasonable return when RISK is considered and a death benefit to protect others in your life. Life insurance as been around a long time. It's in recent time that using the word "investment" along with life insurance has been turned into a dirty word. The comparisons used to make the point against cash value life always seem to involve an equitity that does not share the same RISK profile and only shows equitities in a upward rise.
The reality is a person needs both life and equitities, but not one at the expense of the other. I would avoid those in either camp that stress just one over the other. Planning involves addressing RISK and these choices address RISK in different ways, which is a good thing for most people.
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Life insurance offers protection, income replacement, and the chance to leave a legacy. With life insurance, you are protecting the people you care about the most. Life insurance can also protect the business you own.
There are four permanent life insurance policies to consider based on risk tolerance and long term premium commitments: Participating whole life with maximum term life insurance and paid up addition riders can provide a conservative tax advantaged return based on the portfolio of the life insurance company’s predominate bond holdings. Current assumption universal life also an interest rate crediting method as well. Indexed universal life uses domestic and foreign indices as its primary crediting method. Variable life insurance uses equities and bond allocations to subaccounts and is subject to market losses.
The reality is a person needs both life and equitities, but not one at the expense of the other. I would avoid those in either camp that stress just one over the other. Planning involves addressing RISK and these choices address RISK in different ways, which is a good thing for most people.