Which type of policy is more suitable for someone who wants to invest?
For someone who wants to invest, a universal life insurance policy is likely to be more suitable than a whole life policy. Here are the reasons why:
- Flexible premiums – With universal life, you can adjust your premium payments up or down over time depending on your investment goals and cash flow. This allows you to allocate more funds when you have extra money to invest.
- Variable cash value growth – The cash value in a universal life policy is invested in separate accounts that track markets and investments. This means your cash value has the potential to grow more substantially than the fixed rate offered by whole life policies.
- Access to broader investment options – Universal life policies typically give you access to a wider range of investment options like mutual funds, stock portfolios, bonds, and money market funds. This allows you to create an investment portfolio within your policy.
- Policy loans – Universal life policies generally offer more flexible borrowing terms and options, allowing you to tap into your invested funds if needed. This can supplement your investment strategy.
- Potentially higher returns – Because of the variable investments and flexibility, universal life policies have the potential for higher returns over time compared to whole life policies. This makes them a better option for investing goals.
However, universal life also comes with more complexity, management requirements, and risk of lapsing the policy if funds are not sufficient to cover costs. So it’s important to understand these trade-offs. But in general, the investment features make universal life the better option for someone whose primary goal is investing through their life insurance policy.