Is Life Insurance a Good Investment?

 Is Life Insurance a Good Investment?

Depending on the policy type you choose, life insurance may help supplement your existing investment strategy, but it may not be the right investment tool for everyone. The tax benefits of permanent life insurance policies with a cash value component can lead some policyholders to view life insurance as a good investment. For example, when you pay your premium for a whole life policy, the cash value can grow as a tax-deferred investment, meaning the funds aren’t taxed before they go into your account and they grow tax-free until you withdraw them.

Another reason some individuals may view life insurance as an investment is a tax-free advantage that beneficiaries receive. Though there are some circumstances where a beneficiary may be required to pay taxes on the death benefit, for the most part, the money isn't taxed and your beneficiaries receive the full policy payout. That can be an efficient way to invest when you intend to transfer wealth to a beneficiary.

However, there are other ways to invest and build wealth. America’s Institute of CPAs advises consumers to weigh additional investment options, like stocks and bonds, which may yield better returns. To do so, consider your long-term goals, whether it’s providing a financial safety net for loved ones or leaving behind an inheritance for your heirs. Ask if life insurance or other investment vehicles will best help you reach these goals.

If you’re considering life insurance as a way to invest your money, it's wise to consult a financial planner. They can help you determine what investment opportunities are right for you and where life insurance fits in your overall strategy.

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