Insurance is one of those things you know is there when you need it. It’s not like insurance will give you your money back if you never used it. Take auto insurance as an example. If you drive a car, you need auto insurance. What for? Well, it’s the law to have it in most states and the “just in case” factor. That’s what insurance is…just in case something happens. You get into a car accident, your car insurance will assist. Life insurance is not an investment, it’s insurance.
Let’s switch to life insurance. Life insurance is insurance “just in case” you were to pass away. You pass away, your beneficiary receives the amount on the policy. Life insurance is to assist you continue with your life after your loved one passes away…maybe to help with funeral costs, raising kids, or paying off the house.
There’s different types of life insurances where some are considered as investment. You may have heard of Term, Whole life, or Universal life insurance. So, why the different kinds? Everyone has different needs. If you’re looking for a life insurance plan that pays the beneficiary the amount on the policy after you pass away, they all do it. The difference between them are some help invest your money and one doesn’t. The investment ones have a much higher premium.
Term life insurance is the most straight forward. You pay a set amount for however long your policy is set for. If you die during your policy duration, your beneficiary gets the policy amount as long your policy is active. Term is typically the least expensive.
Whole and Universal life insurance has some added features where your money could earn an interest rate and some of that money can be withdrawn if needed. In other words your life insurance policy is turning into an investment. From my experience, these life insurance premiums are more than the Term…sometimes 3 times or more.
I really don’t see the appeal of Whole or Universal life. If I want my money to be invested, I rather have my money in a brokerage account. Life insurance should be just that…”just in case” you pass away. I don’t want to put extra money into a life insurance policy for them to invest it. If I don’t die within my policy, then so be it. That’s what insurance is all about. You don’t get your money back from your car insurance if you never had an accident do you?
Insurance should be insurance and investments should be investments. Again, that’s just my opinion and everyone’s life needs are different. If you are interested in following my journey, email subscribe to get alerts of latest posts or follow me on Facebook and Instagram.