Is life insurance worth the investment?
When it comes to investing for retirement or the future, people have plenty of options to choose from. They can look at individual retirement accounts (IRAs), including 401(k)s, to help provide for a healthy financial future. If you’ve already maxed out contributions to these types of funds, you may be looking for another option. One avenue you haven’t yet considered may actually be life insurance.
All life insurance options help provide for family and loved ones who are left behind after a person’s death. But in some cases, certain types of policies can prove a sound financial investment for the future.
Whether you’re considering buying a term life insurance policy or exploring permanent life insurance as a vehicle for retirement savings, you should know which one makes the most sense for your needs and how SelectQuote can help you save time and money when shopping for coverage.
Pros and Cons of Term Life Insurance as an Investment
Let’s get one thing out of the way: buying a term life insurance policy won’t help set you up with more retirement money. Term life insurance policies don’t include the cash value option that permanent policies do. What they do offer, however, is peace of mind.
When you buy a term life insurance policy, you often pay lower premiums than you do with most permanent life insurance policies. The insurance company assumes less risk because the term—the length of period you’re insured—has an expiration date. Younger and healthier people save the most money on term life policies
In addition, term life insurance gives you flexibility. You can choose how long you want to be covered. If you think you only need coverage for 10 years, you can choose a term that covers that amount of time. This helps you estimate how much you’ll pay in premiums for the entire life of your policy.
The cons of term life insurance are limited. The major downside is that it doesn’t accumulate a cash value. If you’re still alive when the term ends, the policy lapses and you don’t see any money.
Pros and Cons of Permanent Life Insurance as an Investment
Permanent life insurance offers significant benefits over a term life policy, but it’s not the right fit for everyone. Many forms of permanent life insurance coverage have an investment component, either in the form of a cash value or a dedicated retirement fund. Life Insurance Retirement Plans (LIRPs), for example, are built as investment vehicles that can also be used to provide for your family after your death.
Permanent life insurance policies provide lifetime coverage, assuming the premiums are paid and your policy remains in good standing.
Because permanent life insurance accumulates a cash value, you can borrow against that cash value to help pay for other expenses. Compare that with other retirement plans, which usually require you to pay penalties if you withdraw tax-advantaged funds.
Some permanent life insurance policies allow you to receive portions of your death benefit before you die if you develop specified conditions, including invasive cancers, stroke or heart attack. These accelerated benefits can help pay for medical expenses in your final months.
Of course, permanent life insurance policies have their own drawbacks. They are significantly more expensive. They also have tax implications if you pass away with outstanding loans.
Let SelectQuote Help You Make the Right Decision About Financial Security
Ultimately, buying life insurance in any form can be a good investment to help protect and provide for your family and loved ones after you pass away. The type of policy you purchase, however, largely depends on your unique needs and priorities.
Regardless of whether you want to purchase a permanent life insurance policy for lifelong coverage or a term life policy to help provide peace of mind during a period of your life when your household contributions are more vital, you shouldn’t have to shop for coverage alone. SelectQuote can help you find the right amount and type of life insurance to meet your needs—and we can do it in just minutes.
To learn more about how we compare rates and policies from dozens of carriers to find you the best combination of price and coverage, get your free quote today.