For many people, permanent life insurance is the option that provides both coverage and investment opportunities all rolled up into a single product. However, there are those who do not like putting as the saying goes, all of their eggs into one basket.
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To purchasing the right type of term life insurance for your needs, one of the more interesting theories of investing is described by the phrase – buy term and invest the difference (click here to learn everything how this theory works). This particular theory has driven many people to utilize this strategy when it comes to growing their portfolio while getting the right coverage for their needs.
The Permanent Life Insurance Option:
The good news about using permanent life insurance as part of your investing strategy is that the funds accumulate on a tax deferred basis, the proceeds given to beneficiaries is also free of federal income tax, and as your life insurance needs dwindle when you get older you can access the difference through policy loans.
Of course, there are downsides to investing in permanent life insurance if you have other, better options available. Many financial experts agree that there are investing opportunities that offer greater potential that permanent life insurance, although there are downsides to every option that is available. So if you decide to purchase term life policy instead of whole life insurance, then what are the options available for you to invest the difference? See we have done the job for you. Read below to get the information.
Where to Invest the Difference?
Of course, this particular theory will depend on where you can invest the difference in order for it to be worth the effort. In addition, there are certain factors that come into play which will help guide you on what is the best decision for your particular needs.
Stocks, Mutual Funds, and Bonds: These are the traditional investing option that you can use which will vary based on their returns. Here, the fate of your investments will be decided on the market conditions and the risk that you are willing to take. Stocks for example involve risk that many are not willing to take, especially if you are close to retirement.
Certificates of Deposit (CD): For those who are close to retirement or are adverse to risk, then CDs may be the answer. CDs pay a fixed interest rate and they are backed by the FDIC up to $250,000. However, the interest rates tend to be somewhat low and there are restrictions as to when you can withdrawal the money. Still, for a long term investment opportunity CDs are quite good.
Non-Traditional Investments: From precious metals to Forex and many other types of investment opportunities means that you will most likely be taking a bigger risk although the potential gains will be much higher. If you have diversified your portfolio with safe investments, then taking chances may pay off considerably. However, you may also lose your entire investment that was set aside from your insurance.
In the end, choosing between permanent life insurance and term life while investing the difference will depend in large part on your personal financial situation and what type of results you expect. You may need to consult with a financial expert in order to make the best informed decision about which direction to take.