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How Does the Savings and Investing Component of a Policy Work?

How Does the Savings and Investing Component of a Policy Work?

Permanent life insurance, such as universal life insurance, offers a wide range of benefits for every individual who invests in it. Life insurance is a very important investment for a number of reasons. First, you have financial protection in place for your family. Second, you have a number of add-ons that you can add to your policy that will allow you to benefit.

There is one benefit, however, that can benefit individuals no matter how many add-ons they add on or what their coverage limits are. That benefit is the savings and investing component of the policy. This is something that temporary coverage does not offer its policyholders.

Investing and Saving

You can look at the ability of the policy to gain cash value as a method of investing, while some look at it as a way to save money over time. Because the investment is one that is chosen by the insurance company and is one that is of a relatively low risk, the return can be rather slow.

The return is given to you in the form of dividends and, if you are familiar with dividends, you know that they are small. But think of your personal savings account and how it also gains dividends over time. It happens slowly, but it does build up and create a healthy balance in the long-term.

It is through the long-term that you are going to benefit as your insurance company takes your premium and invests part of it. When it comes to universal life insurance, the investment amount may vary based upon the premium that you pay. Universal life insurance has flexible premiums, as well as a number of other options that you can take advantage of when it comes to your payment.

Universal Life Insurance

Universal life insurance allows a person to control their premium payments. Those payments have a minimum and a maximum amount that can be made. So if you are not having a good month, quarter, bi-annual period, or year, you can lower your premium to the minimum and then increase it to the maximum the following year. You also have the option of using a portion of your cash value to pay your premiums for you, but this will decrease the face value of your policy.

You want your face value to increase so that you can save the money that is accumulated from the investment. However, you can do what you wish. For some, they like to borrow from their cash value when they have enough money and will pay it back just like a bank loan. For others, they prefer to turn in their policy and take the cash and go.

Turning in the policy is ideal for those who may line up another form of coverage, such as something that is comparable that they don't have to pay for through a membership or another plan elsewhere. However, it does not hurt to have multiple policies and you are encouraged to do so to make sure your family has multiple forms of coverage coming in.

Some tend to invest in universal life insurance in addition to their employer policies. That way they can make sure their families are paid. And when it comes to your family being paid the death benefit, they receive the accumulated cash value as well. This allows them to receive more money in addition to the death benefit that you've arranged for them, which can give them more money to work with. So you can make the money work for you and for your family.

ING Transamerica Insurance and Investment Group American General Life Companies Prudential Genworth Financial Services SBLI Life Insurance Company

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