Is life insurance a good investment?

Life insurance is a pretty crucial financial responsibility for most of us but can it actually be considered an ‘investment’? The answer may surprise you.

Is life insurance a good investment?

Is life insurance a good investment? 1920 1280 DeadHappy

You bet your life it is.

Any investment that is dependent on you dying is always going to be a difficult one to sell. There’s an inherent uneasiness in paying for something with the understanding that you will never live to reap the rewards. “What’s in it for me?” is a common question asked. Well, there’s actually a lot in it for you/me, as well as your loved ones; depending on the life insurance type you opt for.

Straight as a die

Life insurance, like all types of insurance, is essentially a wager. When you take out a life insurance policy you are basically betting on the likelihood of your own death. Each month, you will throw a few notes down on the roulette wheel of death and hope that the little ball lands nowhere near your chips. If it does then you (or your next of kin, more appropriately) receive a windfall from your insurers. It’s as simple – but maybe not as melodramatic – as that.

The saddest part of the whole situation is that you will not be around to enjoy the win. You can however rest in happiness assured that you’re family and friends are sorted. So without further ado, let’s get to those life insurance types…

Types of life insurance

Life insurance can generally be divided into two types – ‘term life’ or ‘whole of life’. Term life is what most people are talking about when they say ‘life insurance’ but whole of life may be applicable to you too. You’ll have to assess the differences and decide which would work better for you.

Anyway, to help give you a little more context, here’s a little more information about them:

Term life

As the name suggests, these are policies that cover you for a fixed period of time, typically ranging from 5 to 25 years. If you die before that time is up, your insurers will honour your policy and cough up to your next of kin. It’s very simple, and the cheaper of the two by a fair bit.

Whole of life

No points for working this one out, these policies provide coverage for the whole of your life. As well as the payout to your beneficiaries when you die, whole of life policies also have a pretty complex cash value accumulation element which is only really relevant if you’re pretty wedged, if at all.

Term life v. Whole of life – the endurance in insurance

Life insurance can generally be divided into two types – ‘term life’ or ‘whole of life’. Term life is what most people are talking about when they say ‘life insurance’ but whole of life may be applicable to you too. You’ll have to assess the differences and decide which would work better for you.

Anyway, to help give you a little more context, here’s a little more information about them:

Whole of life insurance is probably not for most people. It’s expensive and it’s complicated. Even if you are minted, there are plenty of other less expensive investment alternatives outside of whole of life insurance. The costs are pretty high and the returns are relatively low. If you are knee-deep in assets, we’d recommend weighing anchor on the super yacht and heading for more lucrative seas (stay away from the tax havens though, Brexit is on the horizon and you’ll need every penny).

Term life insurance, on the other hand, is cheaper and offers much more flexibility. The average person does not have a plethora of investments to worry about. For most people, when they die, they simply want their debts to be paid, their funeral costs covered and their families and friends to be financially secure. For a relatively small amount each month, you can provide that security (and even invest the difference if you’ve recently been inspired by one of Martin Lewis’s musings.

So, back to that investment question

While whole of life insurance may be a viable investment for some well-off individuals, it’s not going to be suitable for most people. Even if you have the resources to make it work, there are many clever clogs out there who would argue that your money is probably better off elsewhere.

When it comes to term life insurance, there’s none of that hullabaloo. It’s a simple deal with simple costs but can’t really be considered an investment in the strict economic sense. However, what it can’t offer in the investment portfolio it makes up for in peace of mind. If you’ve got a mortgage, a partner, kids, friends, a charity close to your heart or even an all-consuming desire to be immortalised in bronze, a term life insurance policy can be the most cost-effective way to take care of your priorities once you’re out of the picture. Sure, you won’t see a penny of it (do the ones placed on your eyes count?) but you will spend your remaining days safe in the knowledge that your loved ones are going to be taken care of.

Now, you can’t put a price on that… well, actually you can. And we have – click here to take a look for yourself.

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