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How ideal would insurance be as an investment?

Both insurance and investment are part of your financial plan. They are important but different elements. Sometimes it is combined into a single product. In this article, I will start by describing the purpose of the insurance and then the purpose of the investment. We will also see what happens when you combine the two.


Insurance is a contract between you and the insurance company. Typically, the insured type doesn't happen much, but when it does, it has a big financial impact. Therefore, it makes sense to protect yourself from these events whenever possible. Examples are

Health insurance to pay medical bills if you get sick. Life insurance provides money for your family in the event of your death, and auto insurance that pays for auto repair and the injuries of others.

In some cases, like auto insurance, it must be covered by law. However, for life insurance, the need for coverage varies throughout your life. A couple with a young family, very few assets, and a large amount of debt will need life insurance for more than one person with no debt or family ties.


You should start investing as soon as your family's standard of living is protected if your income suddenly stops.

Investing is the process of building and protecting assets for your future. This takes time, sometimes life.

If we take the previous spouses, if they decide to invest before they are adequately protected, this can have disastrous effects on family finances if the main winner suddenly leaves. For example, $ 500 invested in a one-month savings plan is probably not worth more than $ 500, while paying the same number for an insurance plan will save your family much more.

Is insurance an investment?

Insurance provides a financial guarantee for you and your family if you are unable to provide care for them due to illness or premature death. This gives you peace of mind knowing that the money you intended to save throughout your life or to help raise your family will be there if you are not. However, it is not an investment.

There are some policies in the market that try to combine insurance and investment. One of these is generally known as full life insurance.

Whole life insurance can offer a variety of insurance benefits.

How does full life insurance work?

The person who owns the plan pays a premium from the insurance company. The insurance company invests this premium in a fund chosen by the insured or her advisor. The cost of insurance benefits is paid by canceling some units that have just been purchased by contribution.

For example, the premium is $ 500 a month and the cost of insurance is $ 200 a month. He buys $ 500 in a box, and then the insurance company disburses $ 200 of the units to pay for the insurance. This leaves $ 300 in the box.

This seems to provide both investment and protection, so what is wrong?

  1. First, the cost of insurance benefits is not fixed. The older you are, the higher the cost. Ultimately, the cost will exceed the premiums paid, so the value of the fund will decrease. Buying life insurance with a fixed premium is cheaper.
  2. Investment rates on these plans are relatively high compared to modern savings plans.
  3. The product is not designed to be used as an investment (although it is often promoted as such).
  4. If the investment fund is weak, the insurance company may ask you to increase your contributions or reduce your insurance benefits.
Another factor that may be relevant at this time is that if you have insurance and investments in separate documents, you can stop saving as much time as you want and that will have no effect on your insurance.

Historically, one of the main benefits of these long-term policies is the so-called "insurance". This is the attribute of the policy, which means that if you continue to pay the premium, the insurance company cannot cancel the policy. Pure insurance policies (temporary insurance) have a limited life. Once the insurance period ends, if you still need insurance, you should reapply and assess your health at that time.

Another use that many UK consultants used for these plans was to pay the UK death rate or estate tax. The advent of long-term warranty plans, some of which up to 40 years, has largely eliminated the need for the combined plan. However, where it is used, it is not a substitute for investment.

In summary, to the question "How ideal is insurance as an investment?" The answer is not.