Is Life Insurance a Good Investment?

Retirement plans such as 401(k)s are an essential part of an employee’s compensation package, and they can be a critical tool for retirement savings. However, as a plan sponsor, it’s important to periodically evaluate your 401(k) plan to ensure that it’s working effectively for both you and your employees.

Benchmarking your 401(k) plan can be an excellent way to evaluate its effectiveness and identify areas for improvement. In this article, we will discuss four key reasons why benchmarking your 401(k) retirement plan is essential.

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For those working on creating wealth and gathering significant assets and investment holdings, one question often posed in the face of advancing years is “is life insurance a good investment?” This is a common question asked by those who may be leaving behind families, potential debt, or even business interests, and in some cases, life insurance may be a solid way to help protect your family and business from your final expenses and remaining debt. In other cases, however, it may prove to simply be a zero-return investment. Let’s take a closer look at when it may be a good idea, and when you should avoid it.

What Does Life Insurance Cover?

Depending on the policy chosen, there are a few answers to this. The proceeds from the right policy will be able to cover your final expenses at a minimum. Additionally, it may be able to cover any potentially outstanding debt you hold, so that your other investments and assets remain safe in the event of your passing. For those you leave behind, it can also help cover life’s general daily expenses, and since the right policy will have guaranteed growth, it can only get better with time.

Term Life Insurance vs. Permanent Life Insurance

The type of life insurance that most people are familiar with is called term life insurance. Term life covers you for a predefined term, which can range anywhere from a few years up to 20 or 30-year policies. Term life functions similarly to any other type of insurance, where you pay a set monthly premium which then entitles you or your beneficiaries to a single large payment in the event of your death.

The second type is referred to as permanent life insurance, and it is designed to cover you as long as you pay your premiums. Some permanent life insurance policies also include an investment component that allows it to grow a cash value that can be accessed in different ways. This is the type of insurance that your financial advisor or wealth management advisor is usually referring to when they talk about life insurance.

The biggest difference between the two is their length and the potential value of the policy. For term life, you pay monthly and at the end of the policy if you haven’t passed, you generally get the option to renew for an additional term, but you build no equity or cash value. Permanent life insurance policies will cover you as long as you keep paying, and will allow you to invest or borrow against the value that you build in the policy.

Is Life Insurance A Good Investment?

This is going to depend highly on your risk tolerance. It does have the ability to provide tax-free income, which is not easy to come by with other investments. It’s also a non-correlated investment, being completely decoupled from the stock market, which means when the market or the economy at large experiences downturns or significant corrections, your policy will not.

Since many policies also have no restrictions regarding minimum or maximum age, and no requirements surrounding income necessary for investment, it also makes it a reasonably sound investment. Overall, if you believe that taxes are going to be higher in the future, it may be a robust addition to your investment portfolio.

For More Investment Advice & Wealth Management Strategies

Depending on what type of policy you’re looking at, you might still be on the fence about whether life insurance is a good investment at this point in your life. If you still find yourself asking “is life insurance a good investment”, reach out to our team at Prevail, and talk it over with some of the best wealth management advisors in the midwest.

Kerry Lawing



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