Life Insurance Investment: Is Life Insurance Worth It?

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Should life insurance be an essential asset to your long-term financial planning? We think so.

Although Life insurance may sound like a financial and emotional burden to some, purchasing life insurance helps protect your loved ones, providing them with financial support through a difficult time.

Various insurance policies are available on the market, making your shopping for life insurance challenging and time-consuming.

Life insurance will help your family cover mortgage payments, help fund your kids’ college education, or pay for their everyday bills and debts.

But did you know that some life insurance policies include cash value that accumulates over time? Furthermore, some of these policies offer living benefits allowing you to access that cash value even while you’re alive.

If you want to learn how to grow your money with life insurance, we suggest you learn the basics of permanent life insurance and how to choose the right insurance for your financial goals.

In this article, we will cover:

The basics of Life insurance

Life insurance is a legal contract between an insurer and a policyholder. The insurer guarantees to pay a sum of money known as a death benefit to named beneficiaries once the insured individual dies, exchanging the premiums paid during their lifetime.

For the contract to be valid, the insured individual must accurately disclose their current and past health conditions when making an application.

Types of life insurance policies

We can divide policies into two main groups: term life insurance and permanent life insurance. Within these categories, there are even more options available. Understanding which insurance plan works best for you can help you achieve your financial goals.

Term life insurance

Term life insurance offers limited insurance coverage, made to cover you for a set term. For example, you can purchase a 20-year or 30-year term life insurance. Like other policies, you have to pay a monthly premium, and in the event of an insured individual’s death, the death benefit gets paid out to the beneficiaries.

Permanent life insurance

Permanent policies usually cost more than term life, but they offer lifelong coverage with additional features such as cash value. Permanent insurance allows you to borrow against the cash value investment component of this account and use this money while you’re still alive.

The two most common types of permanent life insurance are Whole Life and Universal life insurance. Whole life insurance is the most prominent type of permanent life insurance policy, offering permanent coverage for the lifetime and investment component that can grow at a guaranteed rate.

Universal life insurance also offers permanent life insurance coverage but provides more control over your premium payments. With Universal life insurance, your cash value growth is based on market interest rates and the insurer’s performance.

Other types of permanent life insurance are Variable life insurance, variable universal life insurance, and Indexed universal life insurance.

Whole life insurance

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Whole life insurance is one type of permanent life insurance that can provide lifelong coverage. As long as you keep paying the premiums, your beneficiaries can claim the policy’s death benefit once you pass away.

Whole life insurance combines a cash value account and an insurance product. Each month a part of your premium payment funds a cash value account, where cash grows tax-free, similar to a 401 k or IRA account.

Over time you can access your cash value account and use it as an emergency fund whenever you need it. Keep in mind that when you take out cash value through a policy withdrawal or loan, that sum will become taxable.

Is Life Insurance a smart investment?

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Depending on your finances and how long you’ll need insurance coverage, you should choose between a term life and a permanent life policy. Term life may be your primary choice if you want to be covered for a set period, while permanent life offers lifelong coverage.

Term life insurance does not offer a cash value component; therefore, it can’t be considered an investment tool. Once the policy term ends, the policy will lapse, and no death benefit will be paid.

However, if you don’t want a permanent policy and yet you don’t want your money to go to waste, you may find a return of premium life insurance policy attractive. With ROP, you pay flat-rate premiums for a fixed period and get your money back at the policy termination.

Whole life insurance allows you to accumulate cash value in your policy’s investment portion, wholly tax-free and risk-free. You can always borrow against the cash value to invest in buying a house or pay for your children’s college costs.

Whole life guarantees steady cash value growth that can complement other fixed-income investments such as 401 k in your portfolio. However, life insurance is not a replacement for retirement plans if you have access to employer-sponsored retirement plans such as IRA and 401 k accounts.

Also, permanent life insurance is a great investment tool for high-net-worth individuals looking to minimize estate taxes. The death benefit can generate substantial tax savings for wealthy families.

Having permanent life insurance allows you to reinvest your dividends. You can use these dividends to purchase additional coverage as a policy owner. These paid-up additions provide you with more dividend earning potential, cash value accumulation, and death benefit protection. Additionally, you can use your dividends to pay future premiums or withdraw cash.

Life insurance as an investment in estate planning

Life insurance plays a vital role in estate planning as it can be used to preserve your existing estate and help create an estate for your heirs. Typically, insurance premiums are not tax deductibles, but the benefit paid to the beneficiary or the estate is not subject to income taxes.

Although term insurance can be helpful for funding short-term estate needs, paying off a mortgage, and preventing immediate shortfalls, whole life or universal life insurance are superb insurance for long-term estate purposes.

Depending on the size of your estate, there may be hefty taxes due on an inheritance. To protect your heirs and avoid unwanted selling of estate assets to cover tax obligations, you can help cover those expenses with life insurance proceeds.

If you have multiple hairs to an estate, estate equalization can occur as a problem, as assets aren’t always easy to split up. In such instances, life insurance plays an important role, offering compensation to heirs that can not receive death-benefit proceeds, consequently avoiding rifts in the family.

Life insurance as an investment in retirement planning

If used correctly, life insurance can act as a retirement planning strategy. The key is to direct as much premium payment to your cash value account and the least possible amount into your death benefit.

The goal is to regularly pay policy premiums during your working years and grow your cash value on a tax deferred basis. Once you get retired, your policy turns into an income source more than a death benefit.

Sometimes this can require managing two death benefit types and two premium tests, in which case it’s strongly advised to be handled by the insurance advisor or the insurance company.

Protect your business

If you are a business owner or even co-owner, your death could challenge your partners to continue the business once you pass away. Having a life insurance policy can help save the company and help handle the loss of an impactful individual.

Another option is to establish a contract that outlines how a departing business founder or partner’s share should be reassigned to other stakeholders or be sold, known as a buy-sell agreement. In such an instance, life insurance funds this kind of agreement.

Things to consider before purchasing life insurance as an investment

When purchasing life insurance, concentrate on the bigger picture and consider your spouse, children, retirement, business, aging parents, and tax benefits. Understand the differences between term life and permanent life insurance, as well as many types of permanent insurance policies available and insurance companies, to find the best one for you.

This article’s primary goal is to help you make the right investment choices regarding your budget, plans, and financial goals. Consider including an accountant, financial advisor, and estate attorney in your decision-making process to maximize life insurance benefits during your early years. Make sure you have the proper coverage that can adapt to life changes.

Whole life insurance is a favorable investment option for most people; however, we wouldn’t recommend it for those of you who are elderly, as you may not live long enough to see good returns. The reason for this is simple, as the cash value is small during the first ten years of saving due to fees and the cost of coverage.

Pros and Cons of Permanent Life Insurance


  • permanent life insurance offers a cash value account and other additional features and living benefits
  • your cash value account grows tax-free
  • you can use your policy to secure your retirement income
  • it provides a death benefit for named beneficiaries


  • permanent life insurance tends to be more costly than term insurance
  • it can take up to 10 or 20 years to build significant cash value

Where to buy life insurance?

You can buy your insurance policy directly from the insurer or through a broker or an agent. Also, you can purchase it directly from the insurance company if you know which policy you want. If you want a piece of advice from a professional, you can contact a life insurance agent to help you find the best plan for your financial situation.

The most prominent life insurance companies in the U.S. are:

  • MassMutual Life Insurance Co.
  • Gerber Life Insurance Co.
  • Guardian Life Insurance Co. of America
  • Mutual of Omaha Cos.
  • Penn Mutual
  • New York Life
  • Northwestern Mutual
  • OneAmerica Financial
  • Transamerica
  • State Farm Life

Build Cash Value with Infinite Banking

Let us tell you why we love to use the Infinite banking concept to ensure our financial freedom while utilizing the advantages of specific life insurance policies. This concept can be used to help you pay off debt, make investments, and provide a legacy for your family while your policy is growing at the guaranteed 4% compounded interest rate.

Learn how you could make better use of your cash value savings to create an endless banking system and become a banker with Infinite Banking.

With the use of Infinite banking, you can build your wealth while borrowing and repaying the money deposited in your permanent life insurance policy’s cash value account. Thus, you will become both a creditor and a lender.

The Infinite Banking concept

The infinite banking concept imitates how a traditional bank operates without needing to depend on a third party anymore. You will borrow money against yourself rather than borrow money from a bank.

Owning an overfunded Whole Life insurance policy has many benefits, such as borrowing money from it and repaying it later. This way, you don’t borrow money from the bank, you borrow money from yourself, and you pay it back to yourself with the fixed-rate, thus becoming your own bank.

When you combine Infinite banking with your Whole Life Insurance policy, you can single-handedly dictate the cash flow and earn dividends, even though you are using that money elsewhere.

Infinite Banking involves:

  • Overfunding (with after-tax funds) a high cash value whole life policy from a life insurance company.
  • Accumulation of Cash Value(tax-free) throughout the years you are a policyholder of your Whole Life policy.
  • Tax-Free Loans taken out against your Whole Life Insurance policy’s cash value to use for your financial expenses.

Regardless of your financial objectives, we can help you reach them with Infinite Banking.

Final thoughts

Hopefully, this article educated you on the topic of Life insurance investment and what to consider when choosing the right insurance policy for you.

Most people use life insurance to help their family cover the mortgage, education expenses, and other debts or costs remaining after their death.

However, not everyone knows insurance policies can be essential investment tools during your lifetime. Permanent life can help you build wealth and accumulate cash value over time.