Ordinarily, people pick up life insurance policies to cover their loved ones from the hardships that might arise from their death. When is Whole Life Insurance an Investment Strategy?
In essence, taking a life insurance policy is a risk management step.
In modern times, it has become mandatory for insurance companies to have plans that have a maturity date, and to pay a certain sum assured at the maturity of the policy to the policy holder.
That means that if your life insurance policy matures after 20 years, two scenarios could arise. If you die within those 20 years, your beneficiaries will be paid the sum assured as per the policy.
Also, if you are still alive at the end of the 20 years, you will be paid the sum assured. In most instances, the sum assured is a total of the premiums you have been paying, and some interest.
So, this scenario poses brings about the question; Is life insurance and investment or savings plan?
The answer to that question is; It is indeed an investment. Going by the kind of life insurance policies being offered nowadays, taking a life insurance policy can be viewed as an investment.
The difference with other popular forms of investment is in how much you can make from it.
Life insurance is an investment in the sense that you will receive some interest on the top of the total premiums you have paid for the policy term.
Is it a worthy investment in life insurance?
The answer to this question depends on how you use your money.
Some people would prefer to put their money in some other investment funds, where their money will attract more interest.
Honestly, the benefits of a life insurance policy are quite low as compared to what you can find in other investment funds.
» MORE: Is Life Insurance Taxable?
These other investment options do not cover your life, though. What makes the life insurance policy superior, is that the sum assured will still be paid out even if you die after paying only the first premium.
If you are in a situation where you need to save a little bit of money over a long period, a life insurance policy would certainly be a great option.
Picture this. You’ll be able to save just like you would with any other saving plans.
If you die anywhere in between the policy term, your beneficiaries will be paid the total sum assured even if the total amount of the premiums you had already paid is nowhere close to it.
» MORE: Types of Life Insurance
Different insurance companies offer different kinds of policies.
You must take time to explore and compare the various options that are available to you and find out what would be ideal for you.
The premiums for a life insurance policy range widely. You can indeed find a plan that will fit your pocket. You are sure that the sum assured will be paid off at some point.