Types of Life Insurance - Investment Policies

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Article published on 8th July 2008

After Protection Only life insurance policies we have those life insurance policies that also act as investments, like endowments policies or 'whole life' policies.

Previously in this series of articles I have said that life insurance shouldn't be regarded as an investment for yourself, and I will stand by that here. That said, this doesn't mean that life insurance can't be an investment for the rest of your family.

Basically, this sort of life insurance accrues a financial value all of its own that grows over the years. Although the premiums for policies like these may sometimes change as you get older and more infirm, they are generally not for fixed terms that 'run out'. They last until you either cash them in or until you die. So besides paying out an agreed sum along with your invested cash when you die, you could instead choose to cash in your policy before you die.

From my point of view, cashing in before death tends to defeat the object of life insurance, as if you are looking for sound investments and a large return on your seed money there are other more interesting avenues to explore, I feel. Then again, if you have no family or loved ones who you can leave anything to, then cashing in your insurance if you have an investment policy might be a wonderful way of enriching your retirement or old age more than you would otherwise be able to. There's always an exception to the rule!

An investment-style life insurance plan gives all the protection of a standard life policy, but for longer and generally with a larger financial return after you die. If Life Insurance is about protecting your family and loved ones from the financially detrimental affects of your passing, then this sort of life insurance is well worth looking at.

The downside to this sort of policy is that it will tend to be more expensive, so be careful not to commit to something you cannot keep up with.

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