To start with, you have to understand that not every life insurance policy is an investment option at the first place. There are two types of life insurance policies, when broadly classified. These are term life insurance and permanent or whole life insurance. Term life insurance provides coverage or death benefits up to a fixed time frame after which you will not receive anything from the insurance provider. Hence, it tends to be cheaper. However, in case of permanent life insurance, there is no fixed time frame and there are assured death benefits at all stages. Moreover, you can even collect the benefits at the maturity of the policy, at a certain age specified in the policy.
When you go for variations of permanent life insurance like universal life insurance, you get the additional choice of making an investment. In other words, part of the premium you pay goes for the death benefits and the other part is actually invested on your behalf by the insurance provider. So, when you come to think about it, this is an investment where you are not really hands-on and the saving happens without your actually worrying much about it. In other words, if you can afford the premium, this investment takes place in the background, allowing you the additional comfort of extra savings and yields at the time of maturity. However, it might not be the best investment option available. It is ideal for those who tend to spend a lot and would want a safety cushion, through investments made from parts of their premiums.
A lot of people believe that a far better choice to make would be to go for term life insurance and invest the differential in any investment option of your choice. This way you get greater yields and you also have death benefits and coverage for a fixed time period. Term life insurance tends to be cheaper than universal life insurance. You must certainly be careful as to having life coverage at all times by being aware of when your term life insurance ends and if possible extend it. So, it depends on the individuals whether or not they should look at life insurance as an investment option. In fact, there are policies which offer plenty of flexibility in terms of where and how to maximise the investment component and even reduce the death benefits if possible for greater investment.
