Life insurance policies are popular safety nets for those who worry about the future. If something were to happen to you, would your family be able to handle the financial changes to come? Things as simple and standard as funeral expenses are placing large financial burdens on families everywhere. Some individuals, however, are looking at life insurance as an investment opportunity. If you’re considering investing in life insurance, be sure to ask yourself these important questions.
- Do You Really Need Life Insurance?
Sales agents won’t tell you this in their pitches, but not everyone needs life insurance. You might have no dependents, no significant debts and an estate large enough to provide your family members with the means to handle funeral expenses. If this is the case, life insurance is not a necessity–in fact, it may become a burden. Investment or not, if life insurance is not something you need, then you might not want to sink any of your money into it.
- Are You Expecting a Return?
If you talk about life insurance as an investment, then you must be expecting to generate some kind of return on it. Despite what financial advisers and insurance agents may tell you, not many people profit from investing in life insurance. Think of it this way–insurance is a profitable business. If lots of people were profiting from their policies, how would insurance providers be able to make money and afford to pay their agents fat commissions? The insurance industry is not designed to give you a return on your investment, so approach it with caution.
- What Kind of Policy Suits You?
There are several different kinds of life insurance to choose from. Term life insurance, for example, offers you a set amount of time during which you will receive coverage and pay premiums. These policies tend to be more affordable, but if a term policy is not enacted before the term is up, there is no payout. That is to say, if you outlive the policy, your money is gone. Whole life insurance keeps you covered for life, and offers a real investment opportunity, but whole life policies are typically much more expensive.
- Are There Better Investment Options?
Life insurance is expensive and variable. No two policies are alike, and the lowest life insurance rates for smokers may be unreasonably high compared to rates for non-smokers. Many factors go into life insurance premium calculation, and your lifestyle may not make life insurance a good investment option. A traditional or Roth IRA may offer you the same potential for growth as a whole life insurance policy without the high cost. Explore all of your investment options before you decide on life insurance.
- What Are the Salesperson’s Motives?
Remember that in almost every case, a life insurance policy is something that is sold. That may seem obvious, but think of it this way–you are not choosing to buy a policy. Insurance agents are extremely adept at sales, and they will do their best to convince you that life insurance is the right choice. A salesperson is out to make a profit, and the best course of action for you is usually not their concern. Always be wary of salespeople when you consider life insurance as an investment.