Do life insurance give away real value

Tuesday, August 20, 2013

Do life insurance give away real value

Life insurance policies are looked upon as a tax saving instrument these days. Gone are the days when someone would pick a life insurance just to secure the future of his or her dependents. Today, life insurance has lost its sheen. People these days look for better investment policies, which will yield returns. No one likes to dump money just to protect life. 

One of the principal drawbacks is the small returns, considering what the insured receives at the end of the maturity period. The interest rates are so pathetic that many would be rather pushing funds to better instruments that allow them much better returns. Although, life insurance policy holders are likely to get tax saving benefits, yet, apart from its ability to offer tax benefits, life insurance policies have largely remained a not so appealing investment option. 

People are willing to push their hard earned funds onto mutual funds that help them to gain faster, though, there’s an element of risk involved. With all the talk of life insurance policies being a sluggish channel of pushing your money, it has still managed to get the attention of masses. 

Life insurance offering companies have become smarter, and they have repeatedly come out with new and innovative schemes to attract masses. They have successfully done it over the years. 

How to make the most of life insurance policies

The choice of the right insurance policy depends mainly on your financial capabilities, and the position you are in. For someone who has no desire to spend much on life policies, it’s better choose term life insurance.  You have the option to choose in the period of 10 years, 20 years or even more. The best would be 10.

When 10 year policies make sense? It is best at times when you need a cover for a very short time.
Importantly, 10 year policies cost you decidedly less. The premiums will not burn a massive hole in your pocket. However, the term insurance only provides death cover, and no cash gains, which is something to think about. 

The investment perspective is better

Many investors have found whole life insurance policies, a somewhat better option.  If you look at the market, people who have money are not sure as how to invest and where to invest. Either they have lost faith in the stock market, or they find the performance of stock trends tricky. That’s where whole life insurance policies are considered a better choice because it gives them the opportunity to benefit, with extremely little or no risk to their investments.  

It also provides them with cover, but importantly, premiums costs are higher. If you have the desire to make money out of insurance investments, choose whole life policies, or else opt for term life insurance. The most striking feature is perhaps, tax gains on whole life policy. Even the interest on cash accumulated over a period of time is independent of any tax.

The uncertainty in the financial market has undeniably turned the attention of mini investors towards whole life policies because it not only provides cover for the whole life, but also has that investment standpoint tailored to perfection.
Author: Danny Liew

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