Term Life Insurance Articles
When Are Term Life Insurance Policies A Good Investment
2010-02-05
When reading about term life insurance policies, you will often here the term "investment." It may seem like a logical word to use, but as financial planners will often note, term life insurance is not an investment. It is a form of security, but no insurance policy is designed to provide long-term financial gain for its policy holder. This leads many buyers to wonder whether there is ever a time to buy a term life insurance policy where the purchase would act as an investment, and what the benefit of a policy is if there is no possibility of investment.
The reality is that the majority of term life insurance policies are never good investments, at least not in the traditional sense. From a strict financial standpoint, they are a risky buy, as the premiums paid into a term policy are not returned to the buyer if the term expires. This can seem problematic since the only way for a payout to be possible is the death of the policy holder, which certainly is not something that you want to depend on. However, term polices are still incredibly valuable buys, and from a long-term perspective, they are an investment in some sense. They provide what traditional investments like 401ks and IRAs cannot provide: a guarantee that if the buyer dies, his family (or property, as the case may be) will not face financial ruin from funeral costs or living expenses. Term policies are an essential part of every family's financial strategy, and without term life insurance, a sudden death could be catastrophic.
However, that certainly does not mean that no form of term life insurance provides a financial return. Some policy types, particularly return of premium (ROP) policies and convertible policies, allow buyers to regain every premium that they pay in- completely tax free-when the policy ends. If you are particularly investment-oriented, these policy types can be a great buy. They provide the security aspect of a traditional level policy along with an investment aspect. However, returns won't be as significant as any of those standard investment plans mentioned earlier.
If you are looking at term life insurance quotes and trying to decide when to buy, it is important to realize that rates increase as you get older. The sooner a policy is purchased, the lower your term life insurance rate will be. Buying term life insurance is making an investment in your family's future. The best strategy is to buy early and to purchase an adequate amount of coverage for as long of a term as you can afford.
