Adding Life Insurance to Your Investment Portfolio

When you’re thinking about building your investment portfolio, an insurance policy probably isn’t the first thing that comes to mind. But did you know adding life insurance to your portfolio is one of the best ways to diversify your investments? Here’s what you need to know.

Why Invest in Life Insurance?

Life insurance is a simple way to invest and add diversity to your investment portfolio. It comes with tax advantages for the person carrying the policy as well as the beneficiaries of the policy. A life insurance policy can also provide a certain amount of predictability and stability not often found with investment opportunities. As a liquid asset, life insurance can be a great way to invest both for yourself and your loved ones.

How to Invest in Life Insurance

Investing in life insurance simply means purchasing a qualifying life insurance policy. To use your life insurance policy as an investment, you’ll need to purchase some form of permanent life insurance.

The most common type of permanent life insurance is whole life insurance. With a whole life insurance policy, you’ll receive a death benefit as well as a savings account. The savings part of your whole life insurance policy grows based on the dividends the insurance provider pays to you.

For more flexibility, you might opt for a universal or adjustable life insurance policy. Like whole life insurance, there is a savings component to this policy in the form of a cash-value account. The cash value of a policy generally earns a money market rate of interest. Then, after you’ve grown your savings account, you may be able to alter your premium payments. 

Another option is variable life insurance. With this type of insurance, you’ll get a savings account you can use to invest in stocks, bonds and money market mutual funds. This type of policy is a bit riskier because the main components of your life insurance will depend on your investments. For example, if you use your savings account to invest in stocks that don’t perform well, the cash value and death benefit of your policy may decrease. Some insurance providers offer policies that guarantee a minimum death benefit, which can provide some peace of mind if you’re nervous about your investments.

Variable-universal life insurance combines the features of both variable and universal life insurance policies. With this type of policy, you can take on the same risks and rewards you would with a variable life insurance policy. You’ll also have the flexibility typically offered with a universal life insurance policy. 

Making The Most of Life Insurance

Wondering how to get the most out of your life insurance policy? There are a few things that you should keep in mind. 

First, it can be a good idea to pay as much into your policy as possible through your life insurance premiums. This can help you build up the cash value of your policy quicker, which you can use later to cover your premium payments. This can help you save on your premiums over the lifetime of the policy. Once your cash value is high enough, you may also be able to take out a loan against your policy. The amount you take out as a loan will be deducted from your death benefit. But because cash-value loans typically come with lower interest rates than traditional bank loans, it might be worth it, depending on your circumstances.

You can also use the cash value of your life insurance policy to supplement your retirement income. The cash value of permanent life insurance policies is often guaranteed to grow tax-deferred for a period of time, which can work to your advantage. 

If you invest well, your policy could wind up with a sizable cash value. If you can use this money to take out a loan or supplement your income, you should do so. But if you realize you don’t need the money for yourself, you may be able to increase your policy’s death benefit. You need to ask your insurance provider whether you can increase your death benefit in exchange for the cash value of your policy. Your insurance provider might not accept the request, but it’s usually in their best interest to do so.

Compare Life Insurance

Benzinga is dedicated to providing accurate and up-to-date information on the best life insurance policies and providers. It’s a good idea to compare your options before choosing a life insurance company and policy to ensure that you’re getting the right product based on your needs. Here are some options you may want to consider.

Can Life Insurance Make You Rich?

It depends on what you’re looking for. Though permanent life insurance can be a great asset to your investment portfolio, it’s important to keep in mind the purpose of a life insurance policy. 

At its core, life insurance is designed to help provide financial protection to the insured person’s loved ones. By paying monthly premiums, the insured person can guarantee a death benefit that will be paid out to their beneficiaries after they die. Term life insurance can be used for this purpose, but it does not offer lifetime protection or an investment or savings product.

A permanent life insurance policy can help you build wealth. As with any investment, the amount you can earn depends largely on the amount of risk you’re comfortable with. It’s important to consider the different types of permanent life insurance to be sure that you’re choosing one that you’re comfortable with. 

If you decide to purchase a permanent life insurance policy, you’ll want to understand exactly how the cash value of the policy works so you can get the most out of it. The opportunities to build wealth through a life insurance policy come in the form of dividends, market interest rates or stocks. If you’re still not sure which option is best for you, you may want to speak to a trusted financial adviser to delve deeper into the topic.

Is Life Insurance an Asset of the Estate?

A person’s life insurance policy is not automatically an asset of their estate. Life insurance policies allow you to designate one or more beneficiaries you want to receive the death benefit of the policy after you die. If the life insurance policy designates a beneficiary, it is not part of the deceased person’s estate. 

In some cases, a life insurance policy could be part of an estate. Most people take out life insurance policies to provide financial security for their loved ones, especially if there are people who depend on their income. In most cases when an insurance policy is taken out, it is done so with a beneficiary already in mind. A beneficiary can be assigned at the start of the policy, so most policies have at leaset one designated beneficiary. 

Even so, there are circumstances where someone may not have a designated beneficiary on their life insurance policy. This is more likely to happen if the life insurance policy is being used solely as an investment vehicle and not to provide financial security for family members. In these cases where there is no beneficiary, the life insurance policy becomes part of the insured person’s estate.

Next Steps

If you don’t have a life insurance policy, you can ask your employer whether it offers any group plans or you can look for an individual policy. Benzinga can help you make important financial decisions by keeping you informed. Be sure to check back to learn more about life insurance so you can make the best decision for your family.