“Buy term and invest the difference” is the common statement that usually customers hear when it comes to thinking about life insurance as an investment. This statement is based on the idea that, for individuals, the term life insurance is the best plan as it is not so expensive and leaves money for other investment. The permanent life insurance which is another type of life insurance allows consumers to build up the cash value, whereas term insurance does not. But in permanent life insurance policies or investment plans, there are costly management fees and agent commissions. The customers consider these charges as a waste of money, but you can save these charges by selecting the plan online and can think about the investment easily.
When you contact financial advisers and life insurance agents, who are supporting a life insurance plan as an investment; will refer the cash value component of permanent life insurance. You can get the same service through an online insurance web aggregator, also along with the ways to invest and borrow process.
Having Permanent Life Insurance As An Investment
There are many factors that support the use of permanent life insurance as an Investment. Let us check the most broadly advocated benefits of permanent life insurance:
This is referred to the benefit of the cash-value component of life insurance policy which means that you can get tax benefit under 80C and you don’t have to pay any interest, extra payment in your life insurance policy until you withdraw the profits. You can also get the same benefits by choosing a right term plan. If you are contributing your money to these types of plans, then you will surely get tax advantages.
You Can Hold Your Plan Until Age 100, As Long As You Pay The Premiums
The best thing about the permanent life insurance is that you can retain the coverage after a set number of years, whereas in the term plan it will get exhausted after a set period of time majorly at the age of 65 and 70. Some versions of it also allow policyholders to encash the policy without paying any interest associated with the loan provisions.
You Can Have A Loan Against The Cash Value Without Paying Taxes Or Penalties
In this, you can use your money which you have put in a savings account for a particular purpose.
It is really a bad idea to baffle a life insurance plan with a savings account. When you take a loan from your permanent life insurance plan, it will accumulate interest until you repay the same. But what if you die early without repaying it, your beneficiary will receive the lesser death benefit.
Provide Accelerated benefit
Yes, it is true that permanent life insurance provides 25% to 100% of death benefits in case of the particular condition such as stroke, heart attack, invasive cancer and many more. The advantage of this accelerated benefit is that you can pay your medical bills easily and perhaps enjoy a better life. But the drawback of the same is that your nominee will not receive the full death benefit which you intended when you did the selection for it.
It is possible that some insurers charge extra for providing accelerated benefit as the premiums of permanent life insurance is not too high.
Buying Term and invest the difference
As I told you above that this statement “buy term and invest the difference” is highly used by the teams of agents or site of the insurance companies which supports term plan as an investment. In a term insurance plan, all your premium goes towards securing death benefits for your nominee. The term life insurance plan does not have any cash value which shows that it is not a good investment component.
But what you will get on a term insurance plan? In this, you will get large death benefit at lower premiums. Term life insurance provides an unrivaled return on investment should your recipient ever have to use it. Many cases confirmed that having a term insurance provides better cash value as compared to permanent life insurance.
Having permanent life insurance as an investment can make sense for some customers in different situations.
For an average person, the chances are poor that permanent life insurance will be a good investment compared with term insurance plan.