I was recently asked a question, “Why do insurance salespeople pitch life insurance as an investment?” What seemed like an innocent question, had a long thread of comments. On this thread, there were some advisors that offered their opinion and others went off on a rant, making it seem like a comedy hour at the Apollo.
To eliminate some noise and provide you my input, life insurance is pitched by agents and brokers as an investment for many reasons. There are specific types of policies that allow policy owners to take advantage and build “cash value” within a policy. In most cases, these policies offer a better return than traditional banking products like a savings account or a CD. There are also certain types of policies that offer growth potential that is attached to a market index.
Types of Life Insurance: Term Vs. Permanent Life.
If you're talking about term life policies being an investment, then my immediate answer is, no. Term life policies are contracts that cover the insurer's life against the inevitable. Based on that, term life is not a savings or investment vehicle, but there are many reasons why someone acquires a term life policy. It is mainly used to provide the beneficiaries an income replacement for a set period, to offset mortgage as well as other existing liabilities. It is also used to provide an inheritance and obviously to cover the insured's final expenses. The benefit received is dependent on its premium payments (based on mortality tables) and term set or period of coverage. These policies are typically renewable and convertible, but it does not have a “cash value” and is not pitched as an investment.
If you are referring to permanent life policies like a whole life policy or an indexed universal life policy, then it is a different story. These policies allow the contract owner to build “cash value.” Hence, why it's pitched by agents as an investment. Permanent life policies can be used in many different ways and can be implemented in numerous financial strategies, just like traditional banking and other investment instruments.
Does your investment of choice offer your family the protection they require and a guaranteed growth?
When reading the posted comments and replies to “Why do insurance salespeople pitch life insurance as an investment?” it seemed like some advisors weren't paying attention to the question. I guess in a way it's understandable, since it is hard to explain or defend your opinions on a forum. Painting the full picture for people is not an easy task. I know some will argue my answer, but life insurance is an investment vehicle and more.
The key point I want to express to my readers is, life insurance policies offer many benefits, it does provide your beneficiaries financial security in the event of your premature death, a sort of protection for your family. It also has the ability to provide guaranteed growth like other fixed instruments. In addition to these benefits, depending on how it is structured it can be used to mitigate other risks factors, develop a tax-advantaged retirement, or used in a variety of other ways.
Make the most out of your life insurance policy.
You should understand that a financial planning is not a one size fits all solution. We all have different goals and financial obligations. What is more important is the financial instrument and strategy is right for your situation and align with your future goals. Check out the video presentation that illustrates how you can use a life insurance policy to secure your family's future, develop a smart money management system, and a tax-advantaged retirement plan.
If you want to learn how people are benefiting and making the most of their permanent life insurance policies, how they leverage the “cash value” using it to self insure yourself, create a financing solution, develop a tax-free retirement, and allow for wealth transfer click the link and read “Becoming Your Own Banker: Unlock the Infinite Banking Concept.”
For those who have questions regarding developing a financial plan or whether a life policy is right for you, feel free to schedule your free consultation today.
