Term Life Insurance as an Investment?

Most insurance investors don’t consider term life policies as a great way to save and make money. While it’s true that you will not be able to pull money out from your term life insurance policy, that does not mean it isn’t an investment. It is an investment in your heir’s future.

Depending on your age, general health and lifestyle, your life expectancy may be a few years or many decades. Invest your money in a term life insurance policy that will meet and exceed your life expectancy by a few years. If you believe you’ll need an insurance policy with a cash value, consider a universal life or whole life policy.

Calculating Short Term Need
How much will your heirs need? For how long? Determining how much term life insurance is needed seem like a difficult task but it really is quite simple.

Add loan balances for autos, homes and lines of credit. This includes revolving lines, like credit cards and financial aid loans for college and higher education.

Add to the loan balances funds for funeral costs, final medical bills, estate taxes and fees as well as any charitable gifts you’ll make upon your death. This is the short term need your family and estate will require from your term life insurance policy. It is best not to enroll in a policy that doesn’t meet these minimal needs.

Calculating Long Term Need
Long term financial needs afford a bit more flexibility. The easiest way to provide for the long term financial needs for your family is to include this amount in your term life insurance policy. You can add an investment plan to your will, so your estate delegate can grow your policy funds after your death.

When calculating your term life insurance needs for providing for your family in the long term, consider these factors:

Will your spouse or partner be able to work once you are gone? How much supplemental income will be needed to provide the same standard of living for him or her?

If your spouse or partner works after your death, will child care costs be incurred? How much and for how long?

Is your spouse or partner advanced in age or have distinct medical needs that require additional funding? Do you have children with expensive medical needs? How much money will be needed and for how long?

Do you have children that are likely to head to college in the future? Would you like to provide for their higher education in whole or in part?

Add all of your long term needs and provisions, then calculate your available resources.

How much income will your spouse or partner provide annually?

How much is the social security benefit, if any, you will be leaving?

Are there retirement benefits or pension plans you are leaving?

Are there other investments you will be leaving?

Subtract the long term needs from your resources and consider your investment options.

Term Life or Investment – or Both?
Now that you know how much money your heirs will need and for how long, the next choice to make is whether to leave it to them in your term life policy, make an investment that will grow or leave enough funds and instructions for investment to your family. For these decisions, you are best served by consulting with a financial planner.