Reader’s Question:

I’ve been enjoying success with my business (despite the economy) for a while now so I’m thinking of investing. Is a whole life insurance policy a good investment?

Keisha

Buffalo, NY

Among the many types of life insurance coverage, whole life insurance is one of the most expensive. However, it’s a kind of policy that has tons of features which people looking into the long run may find attractive. But is it the right kind of policy for you?

Whole Life Insurance as an Investment

In a nutshell, whole life insurance policies are not the best financial investment option around. Other investment vehicles like mutual funds, the stock market, and bonds can actually offer higher interest rates or gains compared to what you get out of a whole life policy. Whole life insurance has a cash-value feature, where a portion of the premiums you pay are siphoned into. Sure you can sell your policy at a later date, for a fixed-price but again, with discipline and a bit of a know-how regarding investing, you can probably earn with something else.

Advantages of Whole Life Insurance

Whole life insurance is great for those who want to prepare for their golden years. This type of coverage starts to pay-off if you hold on to if for a very long time (say 20 years or more) since the amount of accumulated cash-value may already be enough to pay for the basic premiums and other cost of keeping the policy. So the policy actually gets cheaper the longer you own it.

The Bottom Line

If you are looking to grow your money in the long-run, whole life insurance isn’t your best choice. However, if you are more focused on saving up for old age, preparing for funeral costs, and maybe want to have a way to loan money on your policy whenever you need to, then whole life insurance is a good option.

Tags: whole life ins