Before you decide to have life insurance, you have to consider the types and their differences. In the past, people think that ‘whole life insurance’ is a sound investment. This type of insurance gives people investment returns in the form of dividends for their retirement.
Other than that, we also have term life insurance. This type of insurance does not give people the dividends. So, many people do not consider this insurance as an investment. While some others still consider it a good investment due to the cash benefit it gives to the policyholders’ family.
Yet, as time passes, nowadays, many investment advisors do not recommend this life insurance as a good investment. Yet, if you have people who need to be supported financially, then having this life insurance is still essential for your financial.
Thus, your decision to have insurance as an investment, you should consider your personal situation.
Whole Life Insurance or Term Life Insurance?
In whole life insurance, you have your whole life covered while you build your cash value. For the payment, this type of life insurance will stay the same throughout the policyholder life.
Other than that, the policyholder also has the chance to borrow against their policies’ cash value. But, once the policyholder no longer pays the premiums, the insurer gives the cash value to that policyholders.
On the other hand, term life insurance only covers the policyholder for a specific period of time, such as 10 years or 20 years. In this investment, the premiums are at a fixed rate, while the policy has no cash value.
This type of investment is made to protect its heir.
Variable Life Insurance
Other than those two, we also have variable life insurance. This type of insurance is similar to whole life insurance. Yet, it has an added feature that allows the policyholder to invest some of their premium payments in a different account.
On that investment account, the policyholders can choose different investment funds.
For people who do not have a complicated financial asset to protect, then the whole life insurance and variable life insurance is not a good investment.
Meanwhile, the term life insurance is also not considered as an investment by many financial advisors. Yet, you still can have it as your investment if you are the main source of income in your family.