To understand whether life insurance is an investment or protection, it is important to choose the right kind of life insurance. Life insurance is an ideal option and not per says an investment when it is known to be an asset. This works like a financial instrument which gives you a good return as per your policy package. While you are paying for your package, it might seem like an investment but in case any mishap happens, it is more like enveloping protection. Life insurance is a protection against the tensions that a family faces in case of a death.
It works as a safeguard against unexpected death since death is one thing no man can predict. The best thing one can do in this scenario is to take a proactive approach and make your family financially secure and independent. Purchasing life insurance is the best and most important step of financial planning for a family. This protects not only one’s life partner but also other members of the family as it takes care of some percentage of your expenses. When you buy the right package for yourself, you are providing a source of survival for your family.
Mainly there are two kinds of life insurance where the first type is known as permanent or whole life insurance and the second type is term life insurance. In the first kind, the insurance company provides you a cash disbursement at the end of the life insurance policy. This plan is the same as owning a house where you keep paying monthly installments and can build equity. The company also invests a certain amount so that when you retire, you get cash value. There are again different kinds of permanent life insurance policies. Meanwhile, in the term life insurance, it is short time protection that is provided by an insurance company. It is similar to renting an apartment, where you pay monthly rents. This means that while you are paying the rent, you have access to your assets. The beneficiaries here receive a disbursement even when the policy is in effect in case of unexpected death. It can be said that life insurance is not necessarily an investment and works more like a protection for your dependents. When you have the right kind of life insurance policy you get innumerable benefits. It is thus important that before purchasing one always talk to your financial advisor.