The main purpose of buying Life Insurance is that it offers a chance to make your family financially secure, in the event of your untimely death. But these days, Life Insurance can also act as a great investment tool or even be good enough as a retirement planning tool. There are several policies that can give good cash value. This can be utilised to pay any expenses you have incurred, to pay a loan or even enjoy higher returns.
We’ll look at what different kinds of life insurance offer and how you can use them as effective forms of investment.
Here’s a look at how insurance policies can serve as an investment tool and how you enjoy benefits
Though each insurance policy can be a good investment, you need to study the clauses and terms, so to get the best deal out of them.
Permanent policy: There are three kinds of policies under the permanent policy which are whole life insurance, universal life insurance and variable life insurance.
These plans allow for cash value against the premiums that you pay every month or as per the term stipulated. This amount gets better over the time, as the interested accrued is reinvested and the policyholder gets the compound interest too. You can borrow the cash value as when you need in an emergency and you do not even have to pay tax for it. Other advantage is that the funds keep growing and it is tax free.
Whole life insurance: The funds keep growing without tax. The cash value growth is based on the rate that has been fixed at the time of purchase of the policy. The cash value can also grow on such a rate that it may exceed the premium amounts you have paid. The dividends gained from it can be used as per your preference, either to pay the premium or to buy another insurance policy or even get the cash back.
Universal Life Insurance: As with Whole Life Insurance, this insurance also gives you tax-deferred cash value growth and the minimum rate of return that has been fixed at the beginning of the insurance term. As per the performance of the insurance, the interest can grow. The loans that you take against the insurance are tax free or you can even withdraw the amount. The advantage is that once you have the money, you can invest in other schemes of your choice, all the time without emptying the cash value.
Variable Life Insurance: As with Universal Life Insurance, premiums that you pay for Variable Life Insurance is not fixed and keeps changing. The returns that you get can be as or more than any other investment options available, especially those ones whose returns depend on how their market value grows. As these are tax-deferred, the policyholder gets a higher return than any other investment, which is a bonus.