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Would you use Life Insurance as an investment vehicle?

We are close to debt free. And are looking at investment vehicles. It was suggested that we could use a life insurance as an vehicle at 6.5% interest. This seems better than a CD. And we would have access to it in 10 years for our daughter's education. What is your opinion? I have never consider this before as a way to build savings.

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Asked by MumFerg at 3:59 PM on May. 19, 2009 in Money & Work

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Answers (10)
  • I'm not sure about the 6.5% interest, but we did buy a universal life policy that converts term into whole. Our policy has a couple of features on it that I liked, such as a "salary" after you hit a certain age (the older you are, the higher the salary". Also, depending on what kind of estate you'll leave behind, the life insurance policy can be an effective means to address the estate taxes.

    Talk with several agents and brokers. A good financial analyst will help you choose the one that best fits your needs.

    Answer by Busimommi at 4:24 PM on May. 19, 2009

  • Although a way to build some cash is through life insurance, life insurance should not be considered an investment. The projection may be at 6.5%, but that may be just a projection. What is the GUARANTEED rate of interest? Because it is life insurance, there are charges for mortality and expenses. I would have to look more closely at the illustration that is being shown to get a better understanding of what is being presented.

    Answer by gaalar at 5:48 PM on May. 19, 2009

  • We were told 3.8% is guaranteed.

    Answer by MumFerg at 5:59 PM on May. 19, 2009

  • Did they give you any projection or was this just something that was sent in the mail or something? I only ask all these questions because I was in the financial industry for 10 years before I made a career change. I don't mean to play 20 questions. LOL

    Answer by gaalar at 7:12 PM on May. 19, 2009

  • Who is the insurance company?

    Answer by gaalar at 7:13 PM on May. 19, 2009

  • No. You should have a term life policy to protect your home and children.
    You should consider joining a stock club; this is a great way to learn about investing, and now it a good time to dip a toe in the stock market. There are also money market funds available through brokerage houses that are paying 5-6%; just be sure to get one that is "no-load" (means no fee)

    Answer by rkoloms at 6:07 AM on May. 20, 2009

  • Open a 529 for ur childs education- u should have retirement accounts for yourself- the stock market will eventually stabilize - for someone "new to investing" check out MUTUAL FUNDS and MONEY MARKET ACCTS.- also CD's the only way to make sure u dont lose all your money is to DIVERSIVIE-DO NOT PUT ALL YOUR EGGS INTO ONE BASKET! Life Insurance is great for when someone dies and you can leave your children something, but never just invest in one option.

    Answer by pamom222 at 7:41 AM on May. 20, 2009

  • We do currently have mutual funds. Despite the time to buy in the stock market, I don't like the high risk. Other benefit we were told about the supplement life insurance is we would avoid the taxes that other investments we would get hit on. So for low risk, low tax it appears to be a high yeilding savings account that provided life insurance just incase something happened. Am I looking at it wrong?

    Answer by MumFerg at 1:00 PM on May. 20, 2009

  • I was a Financial Advisor at MetLife for 2 years and I would say no. Only use life insurance as an investment vehicle if you are unable to discipline yourself to save/invest consistently. Since you have a 10 year time horizon, look to mutual funds or even precious metals. A 529 is good as long as someone goes to college. The money can be used by the person it is set up for, a sibling or a parent. I'd be glad to explain more if you still have questions.

    Answer by TrekkieMom at 7:35 PM on May. 20, 2009

    You hand your money over to an insurance company to do the investing for you. Yeah that doesn't make sense at all!! Life insurance is incase you die before you hit retirement- it's not for life. At retirement you should have enough money socked away to take care of your loved ones if and when you die. Buy term life. It is pennies on the dollar.

    Invest the difference in to a mutual fund. If you don't feel comfortable picking out the funds, pick an investor to help you pick- not an insurance company.

    BTW has checking accounts that give you 3 to 5% interest.

    If your income is under $200,000 use Education Savings Accounts to save for your kids college funds. Bottom line is- be smart about it.


    Answer by Erica_Smerica at 11:07 PM on May. 20, 2009

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