Investing Money Through Your Life Insurance Policy

It’s bound to happen if at some point you decide or look into buying a whole life insurance policy. you will likely hear about the possibility of paying more than your premium in order to invest through your life insurance. Why would you do it?

Automated Saving: By going down this route, it’s fairly straight forward to invest for your retirement, you usually only decide the type of investing that you’re looking to do and everything else will be taken care of

Tax Savings: Depending on where you live and how the policy is structured, you could get significant tax advantages by investing through your tax policy (in some ways similar to non-taxable retirement accounts like 401K, IRA or RRSP’s)

It’s Not A No-Brainer

Even though both of those are significant benefits, it’s critical that you consider everything involved if you go down this route:

Fees: There are often significant fees involved in such strategies. The investments might have very high annual fees (mutual funds usually) and those can offset part or even all of the gains. If you are paying 2% more in fees to go through this strategy and have a 6% expected long term return, you are paying a third of your performance in fees.

Withdrawing Money: It’s usually possible to get money out of your life insurance policy through different methods and it’s important to understand how it can be done in your policy, what taxes and fees apply, etc.

Lack Of Flexibility: No doubt, it’s great when you have to spend little to no time to optimize your investments but that comes at a price. You will have little to no choice in how your money will be invested. You might choose between aggressive, balanced, safe, etc. But that is hardly being able to avoid certain sectors, etc.

Are You Considering Investing Into Your Life Insurance Policy? I’m guessing that many of you got here because you’ve been pitched on the idea and are considering it. How was it presented? Let me know if you do end up going for it!

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