Many Investors Turning to Life Insurance Instead of Bonds
More financial advisers are steering their clients towards life insurance as a saving mechanism since government bonds are offering low rates. Unlike term life insurance, permanent life insurance does not lapse, and it offers a unique way to save for retirement while still have a death benefit. According to the article "In a Volatile Market, Some Turn to Insurance Instead of Bonds" by Paul Sullivan on NYTimes.com, the rate of return on permanent life insurance is 3-5% but in addition to this, the money passes onto beneficiaries free of income tax and owners can actually borrow against the policy without worrying about taxes.
While life insurance can be a great option for many, it is important to keep in mind that life insurance can come with hefty fees that consumers don't always understand. There can by layers of fees for the management of the underlying investments, for expenses and also for the cost of covering higher risk customers who do not pay their premiums. Some financial advisers point out that life insurance policies limit the gains that someone may get on money invested and they gains likely would go down the longer you live.
While this may sound unappealing, the volatility of the market is keeping investors away from traditional saving methods. Interest in permanent life insurance has increased greatly as yields on US Treasury bonds continue to be low and returns are unsteady. Many reputable insurance companies including Anthem Life Insurance and Hartford offer quality whole life insurance policies with reasonable fees. It's still important to ensure you understand how many fees there are and how the fees are incurred. Have an expert walk you through the fine print to make sure you fully understand how the policy operates and you aren't left paying higher, unnecessary fees.