One of the main reasons to invest in Life Insurance is getting financial security for your family in an unpleasant event of your death. Life Insurance Policy also works as a powerful retirement planning and investment tool as you can generate a sizeable cash value from certain plans during your lifetime. This cash can then be used to pay unexpected expenses, borrow a loan, and benefits for higher returns from your life insurance policy when you leave it for years to grow. In this blog post, we shall check how different insurance plans can be used as an effective investment tool.
The main kinds of permanent life insurance policies are whole, variable, and universal plans. All these plans gather some percentage of cash value against the premiums invested in them. This cash value offers a positive rate of return when kept for several years. The interest then gets re-invested and offers the complete death benefits and benefit of compounded growth for your family. Some of the financial benefits generated by permanent life insurance policies are:
As long as the premium is paid, the policy remains active.
You can borrow the cash value without penalties and taxes.
During the time of financial emergency, you can always make withdrawals from the cash value.
Let us check how different kinds of permanent life insurance plans shall help you meet the required investment goals:
The whole life policy can accumulate a cash value against the premium payments made by you so that you can take benefits of the guaranteed death benefits for the security of your family if you are making regular premiums and the policy is still active. This policy also provides benefits such as:
The cash value generally acts as a savings vehicle and your funds are grown on a tax-deferred basis.
The growth of the cash values is guaranteed if you pay a regular premium which is fixed at the time of buying the policy.
The dividends incurred from the policy can be used to invest in additional insurance and pay other premiums.
Although Universal life insurance plans are quite similar to whole life insurance, the interest can be higher according to the standard interest rates and market performance. While using universal life insurance, you should invest more than the cost of your insurance into the policy because the excess funds will accumulate as the policy’s cash value and will also earn interest based on current rates.
Variable insurance is similar to universal life insurance as the premiums are flexible and they can be invested in numerous financial vehicles. The returns are also dependent on the performance of those funds.
Although all these policies have their own benefits, the returns from these plans can be smoothly positive and high, especially when the funds perform well in the market. It is important to understand the working of life insurance as it is an essential part of maximizing your benefits. So take enough time to explore all these options and choose best for yourselves.
Life Insurance is getting financial security for your family in an unpleasant event of your death. Check how different insurance plans can be used as an effective investment tool.