Whole life insurance is a permanent life insurance policy that invests money during its growing years and pays a benefit when an insured party passes away. This benefit can be used to pay for the funeral costs of the deceased and to support their family after their passing. Whole life insurance typically costs more than term life insurance and can be more complicated too. However, whole life insurance does offer some benefits over term life insurance. There are a few instances where whole life insurance is worth purchasing over other investment strategies.
For people who earn high incomes, whole life insurance can be a very good investment. However, the policy is only a good investment if other investment vehicles, such as a 401K or Roth IRA are maxed out. Because whole life insurance policies are expensive, they are not the best options for people who do not earn a high income. High-income earners can use whole life insurance policies to add diversification to their portfolios.
Maxed Out Plans
If you do not earn a high income but have maxed out your 401K, IRA, Roth IRA, and 529 savings plan, then investing in a whole life insurance policy will provide you with an additional place to invest your money. Rather than leaving your money sitting in a bank account, investing in a whole life insurance policy will allow your money to grow, with possible dividend returns, depending on the policy that you purchase.
Though whole life insurance is still expensive for children, you will be able to purchase the policy at a lower rate for them. This low rate will carry on throughout their lifetime and will later be cheaper than other life insurance policies. Additionally, the invested money will continue to grow throughout their lifetime and will be far more in the future than the amount that you initially invested. Much like a 529 savings plan, this can be a good way to fund a child’s college years.
As long as someone lives, the premium of a whole life insurance policy remains the same, and the death benefit is paid upon their death. Whole life insurance policies are not ideal for most people, as it is one of the more expensive ways that a person can save for their retirement years, but there are a few people who can benefit from owning a whole life insurance policy. It is important that you do your research into other investment plans, before investing in whole life insurance, as some plans may allow for you to achieve an even greater return on your investment. Rather than follow the persuading speech of an insurance agent, do your due diligence to determine what will work best for your situation.