When most people think of life insurance, they often aren’t thinking about investing at all. After all, investing is something we do to prepare for our future security and happiness, at least most of the time. Buying the best life insurance is something we do to prepare for someone else’s future, which we will necessarily not be a part of if the life insurance policy ever pays out.
Most people who buy life insurance indeed do not have an investment option built into their policy. These policies are called term life policies. They only apply to a specific period of time, after which the policyholder either renews or stops paying as coverage ceases. Term life insurance makes sense for many customers because it is affordable, it can be adjusted to fit the specific needs of the individual and their dependents, and it’s so simple to understand. However, there is another option for people who want life insurance that exists for life and which also has an investment option attached.
Investing with Life Insurance
This option is known as whole life insurance. Whole life insurance, as its name suggests, will be in effect for the policyholder’s entire life, even if they live to 120. It is more expensive than term life insurance, because the death benefit is guaranteed to be paid at the policyholder’s death, no matter what. There are many forms and options for whole life insurance, but one of the most interesting is the one which allows investing.
There are a number of tax sheltered investment accounts used by investors to grow their money while paying the least possible amount of taxes. There are maximum contributions beyond which a person cannot pay into these accounts, at least in one calendar year. For example, the policyholder will not be able to put more than $5,500 into their Roth IRA in 2017. If an individual has a Roth IRA and a 401(k), but has more money to invest than those accounts can contain, it can be hard to find another tax-protected investment account option.
Whole life insurance can be that account. Portions of the money put into these accounts will be invested into equities markets and other investment asset classes. There are different ways that this kind of policy can be organized, but in most cases, the death benefit is related to the amount of money deposited and the degree to which it has grown during investment. For people looking for a sure way to give benefits to their loved ones at the time of their death, and who need an extra place to invest money efficiently, whole life insurance may be just the thing.
Term life insurance and Whole Life insurance will appeal to entirely different types of people usually, but sometimes a person doesn’t know which one to go with. If you are confused about which policy to get, talk to an insurance representative today to explore your needs and the products which will best serve them, at a rate you can afford.