Why should I invest my money in a life insurance policy?
As i am 24 now i get lot of calls from lot of insurance companies asking to take up an insurance policy.... So i decided to get answers for some of my questions in basicallymoney...
Why should i invest my money in insurance?
What age would be appropriate for investing money in insurance?
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As a 24 year old, single,your needs for insurance are minimal.
Why you might consider it are for these reasons. You are young, so it will be cheaper than buying say at 34. Insurance is always on sale.
Two, there is no guarantee that your health will always be good, you may have to pay additional premiums later or even be refused coverage. Ask me, I pay 70% more than others my age for the same coverage.
Three, insurance ownership with equity values can grow tax free as you accumulate the monies. Consider it like a bond portfolio offering guaranteed returns on portions of the growth, and a long term return of 5.5% or slighly more.
Four, stating sooner versus later means more cash buildup. Just like being in a pension will generate more cash for you by age 65, than if you had started at age 34.
Insurance is only one tool in getting a good start. It is not a panacea.
Insurance isn't an investment. It's a hedge against your untimely death, and is meant to replace the potential income that will be lost by not having you there to provide for your family.
Buy term, and invest the difference. Traditional investments will outperform the insurance fund, as well as offering more flexibility.
I can tell you the reason the people who are calling you think you ought to use life insurance as an investment.
What they will tell you: It is a way to avoid taxes.
What they are thinking: It is a way for me to sell an investment with a huge commission.
Whole life insurance as an investment really doesn't make sense for all but a very small minority of investors. If you have people that depend on your income to survive, buy term life insurance. It is much more practical and affordable.
John's answer is similar to what I was thinking. You should invest in insurance "because there's an insurance salesman who needs to pay to send his kid to college."
I will never be a fan of any type of permanent insurance, and I think it wrong to sell a single person with no dependents such a policy. I've used the expression "Variable Annuities are sold, not bought." I feel the same about these insurance policies.
The best advice I can offer in a short reply is this: If you need life insurance, buy term. Save as much as you can, 10% minimum, more if you are able. A young person should be saving for retirement and to position them self to buy their first house, if that's what they wish. What good is a full up Whole Life policy when you need to raise K to put down on a house? Sorry to sound like I'm lecturing, this is one of my hot points.
Who depends on you?
I personally wasn't insured until I had a family. Of course I had the required insurance policies like auto, but no health until I was 29 and had a kid who needed me. Now I have health, dental, vision, life, auto, homeowners and renter's insurance.
I can't let an accident or disaster affect my baby's future.
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