Asked by carolnorrishomes  |  Submitted January 28, 2016

I currently have two term life insurance policies. The premiums are expensive and rise yearly. Should I invest that money instead?

I am 65. Suffered a bankruptcy 3 years ago but I'm okay now. What is variable life insurance?

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  Answers  |  2

January 28, 2016

Variable life insurance is a form of permanent insurance protection which invests in a variety of investments in order to increase the growth and return of the cash value that is built up over time. The big issue with these types of policies is the fees associated with the side funds. My opinion is that when a person needs life insurance they should purchase either a Term life policy and invest the difference in savings from the cost of a whole life policy, or depending upon age purchase a Return of Premium term life policy which will return your premiums in full at the end of the term of the policy. Permanent insurance Whole life, or Universal is important as well and should be part of your financial program. If you have additional questions call me the number is on my profile.

$commenter.renderDisplayableName() | 10.01.20 @ 22:08


January 29, 2016

Hello Carol,

You have two term policies, and then you mention investments in the same question. It prompts me to ask this: is there a need for the death benefit provided by the life insurance? If there is, then maybe it is time to purchase new term life insurance that does not increase in cost, which is matched to the term of the need itself. Then reduce to one policy that handles all of the risk you are presently covering with two policies.

Consider: your life insurance objectives and your investment objectives are presently separate items, not connected items. When you purchased your term coverage you likely knew that there was no investment potential: term is just a premium for a death benefit with no cash accrual. So, your life insurance and your investment goals have never actually been connected, are not connected now, and the solution takes off from there.

Here it is: buy term (if you need a death benefit) for as long as you need it so that the implied problem in your question is taken care of ( that being the increasing cost, which stops when you buy a new level term plan). Now that that is done, consider what you might do with investing. You know that stocks are down, and that means there is a sale going on. Hmmm, could be the right time! Indexed Universal Life is doing well right now; all the gain and none of the loss (my IUL statement today tells me that the weighted average crediting rate is 9.69%). Liking that! Convert one of the term plans to IUL and off you go. Mutual funds? FBIOX looked good, but then, well, that went the way of stocks in the last few months. So far, my permanent life insurance is doing better than anything else I have, It is a fixed product so market volatility is not keeping me up at night, like it might with a variable insurance plan. Don't take that as a slam on variable products, just a nod to indexing and an upward gain in a down market.

The moral of the story is this: a need for life insurance is often not offset by anything else - except for cash in the amount of what the life insurance death benefit might be. Yes, your life insurance can operate as an investment, but if you want to pay a smaller premium for just a death benefit, go with term - and then invest what you want where it will work for you. Hope that helps!

Kirby Thomas

$commenter.renderDisplayableName() | 10.01.20 @ 22:08