When you think about building your investment portfolio, an insurance policy is probably not the first thing that comes to mind. But did you know that adding life insurance to your portfolio is one of the best ways to diversify your investments? Here’s what you need to know.
Why invest in life insurance?
Life insurance is a simple way to invest and add diversity to your investment portfolio. It is accompanied by tax advantages for the bearer of the contract as well as for the beneficiaries of the contract. A life insurance policy can also provide some predictability and stability not often found in investment opportunities. As a liquid asset, life insurance can be a great way to invest for yourself and your loved ones.
How to invest in life insurance
Investing in life insurance simply means buying a qualifying life insurance policy. To use your life insurance policy as an investment, you will need to purchase some form of permanent life insurance.
The most common type of permanent life insurance is whole life insurance. With a whole life insurance policy, you will receive a death benefit as well as a savings account. The savings portion of your whole life insurance policy increases with the dividends paid to you by the insurer.
For more flexibility, you can opt for a universal or adjustable life insurance policy. Like whole life insurance, this policy has a savings component in the form of a cash value account. The cash value of a policy generally earns a money market rate of interest. Then, after increasing your savings account, you may be able to change your bonus payments.
Another option is variable life insurance. With this type of insurance, you will get a savings account that you can use to invest in stocks, bonds, and money market mutual funds. This type of policy is a little more risky because the main components of your life insurance will depend on your investments. For example, if you use your savings account to invest in poorly performing stocks, the cash value and death benefit of your policy could decrease. Some insurers offer policies that guarantee a minimum death benefit, which can give you some peace of mind if you’re nervous about your investments.
Variable universal life insurance combines the features of variable and universal life insurance policies. With this type of policy, you can assume the same risks and benefits as with a variable life insurance policy. You will also benefit from the flexibility generally offered by a universal life insurance policy.
Getting the most out of life insurance
Wondering how to get the most out of your life insurance policy? There are some things you need to keep in mind.
First, it may be a good idea to contribute as much as possible to your policy through your life insurance premiums. This can help you build up the cash value of your policy more quickly, which you can use later to cover your premium payments. This can help you save on your premiums for the life of the policy. Once your cash value is high enough, you may also be able to take out a loan against your policy. The amount you take out as a loan will be deducted from your death benefit. But since cash value loans typically come with lower interest rates than traditional bank loans, it may be worth it, depending on your situation.
You can also use the cash value of your life insurance policy to supplement your retirement income. The cash value of permanent life insurance policies is often guaranteed to grow tax-free for a period of time, which can be to your advantage.
If you invest well, your policy could end up with a significant cash value. If you can use that money to take out a loan or supplement your income, you should. But if you realize you don’t need the money for yourself, you may be able to increase your policy’s death benefit. You should ask your insurer if you can increase your death benefit in exchange for the cash value of your policy. Your insurer may not accept the claim, but it is usually in their best interests to do so.
Compare life insurance
Benzinga is committed to providing accurate and up-to-date information on the best life insurance policies and providers. It’s a good idea to compare your options before choosing a life insurance company and policy to make sure you’re getting the right product for your needs. Here are some options you might want to consider.
*outside New York
Ladder Insurance Services, LLC (Cal. license # 0K22568; Ark. license # 3000140372) offers term life insurance policies: (i) in New York, on behalf of Allianz Life Insurance Company of New York, New York, NY (policy form # MN-26); and (ii) in all other states and the District of Columbia in the name of Allianz Life Insurance Company of North America, Minneapolis, MN (police form # ICC20P-AZ100 and # P-AZ100). Only Allianz Life Insurance Company of New York is authorized to issue life insurance in the State of New York. Insurance policy prices, coverages, features, conditions, benefits, exclusions, limitations and available discounts vary from insurer to insurer and are subject to certain conditions. Each insurer is solely responsible for any claim and has financial responsibility for its own products.
Can life insurance make you rich?
It depends on what you are looking for. While permanent life insurance can be a great addition to your investment portfolio, it’s important to keep the purpose of a life insurance policy in mind.
At its most basic, life insurance is designed to help provide financial protection to loved ones of the insured person. By paying monthly premiums, the insured can guarantee a death capital which will be paid to his beneficiaries after their death. Term life insurance can be used for this purpose, but it does not provide lifetime protection or an investment or savings product.
A permanent life insurance policy can help you build wealth. As with any investment, the amount you can earn largely depends on the level of risk you are comfortable with. It’s important to consider the different types of permanent life insurance to make sure you choose one you’re comfortable with.
If you decide to purchase a permanent life insurance policy, you’ll want to understand exactly how the policy’s cash value works in order to get the most out of it. Opportunities to build wealth through a life insurance policy come in the form of dividends, market interest rates or stocks. If you’re still unsure which option is best for you, you might want to speak to a trusted financial advisor to discuss the matter further.
Is life insurance an estate asset?
A person’s life insurance policy is not automatically an asset of their estate. Life insurance policies allow you to designate one or more beneficiaries for whom you want to receive the policy’s death benefit after your death. If the life insurance policy designates a beneficiary, the beneficiary is not part of the deceased person’s estate.
In some cases, a life insurance policy may be part of an estate. Most people take out life insurance policies to provide financial security for their loved ones, especially if there are people who depend on their income. In most cases, when an insurance policy is purchased, it does so with a beneficiary already in mind. A beneficiary can be named at the start of the policy, so most policies have at least one named beneficiary.
Even so, there are circumstances where someone may not have a named beneficiary on their life insurance policy. This is more likely to happen if the life insurance policy is used only as an investment vehicle and not to provide financial security to family members. In these cases where there is no beneficiary, the life insurance policy is part of the insured’s assets.
If you don’t have a life insurance policy, you can ask your employer if they offer group plans or you can look for an individual policy. Benzinga can help you make important financial decisions by keeping you informed. Be sure to come back to learn more about life insurance so you can make the best decision for your family.