Wednesday, March 11, 2015

The Benefits of Using Permanent Life Insurance as an Investment

Most people understand that their life insurance can be used as an investment. In most cases, however, people who use life insurance as an investment are doing so with term life insurance. They simply buy the term policy and then invest any leftover funds. And, while there’s nothing really “wrong” with this strategy, there is a sometimes better and often overlooked option. That option is to invest in permanent life insurance. With this option, individuals can gain cash value via their policy, which can’t be said for term policies. Yes, there are some management and agent fees involved, but in many cases, it can be a smart choice- even the smartest choice. Read on to learn
about some of the benefits of investing via permanent policies and to see if this option could work for you.

Tax Deferred Growth
Perhaps one of the best investment features of permanent policies is that, as the policyholder, you are not responsible for paying taxes on interest, dividends, or even capital gains. The only time you actually have to pay these taxes is if and when you make a withdrawal.
However, do bear in mind that there are other ways to receive this tax free benefit, including IRAs, 401(k)s, IRAs, and other employer-offered plans. If you plan to contribute more than your plan allows, however, permanent life insurance may be a better investment option for you.

High Age Limit
You can keep a permanent life insurance plan for a very long time! In fact, most plans specify that the policy can be held until the policyholder is 100. Some don’t even have a limit! Term life insurance policies, of course, aren’t nearly as long lasting. They simply end when the term of the agreement ends, so if you’re looking for longer-time coverage and a longer-time investment, a permanent policy is the way to go.

Borrowing Options
As mentioned, permanent life insurance policies actually accrue a cash value, and you can do whatever you want with that money. That includes putting it in a savings account, and best of all, if you do that, you won’t have to pay taxes on the money. You can borrow the money your policy collects to do...well...whatever you want. Whether that’s paying for a child to go to college or paying off your mortgage, that’s up to you. You don’t get that benefit risk-free with other types of plans, which often charge penalty fees for taking out money early.

Care When You’re Ill
No one likes to think about getting old and sick. Unfortunately, however, illness does happen. The good news is that, if you have a permanent life insurance policy, and you develop a covered health condition or serious illness, you could receive some or even all of your policy’s death benefit while you’re still alive. Known as accelerated benefits, this bonus could allow you to pay for your care, thereby keeping the burden of it off of your family’s shoulders. This benefit can sometimes be found with term policies, but it’s easier to get and more straightforward with a permanent policy.

As you can see, there are many benefits to investing via a permanent life insurance policy. However, term policies and other investment options offer their own benefits as well. The bottom line is that there are pros and cons to any choice you make. You simply have to weigh your options and carefully consider whether or not investing through a permanent policy is the right choice for you.

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