Life insurance is a lousy investment
Life Insurance is not an investment. However, it compares very favorably with conservative investments such as bonds, money market funds, and other cash reserve funds. Over the long haul, twenty years or more, a competitive cash value policy will normally have a 5%-8% tax-deferred compound rate of return. If you substract out the term cost, the rate of return on the cash value is typically about 8%-10% compounded. Because this is a tax-deferred return, this is equivalent to 12%-15% pre-tax. Of course, the rate of return on the death benefit is even higher, and it is ultimately tax-free.
You have to die to win
Today’s policies feature an accelerated death benefit that provides 50%-70% of the face amount in cash if you are deemed by your physician to have 12 months or less to live.
The cash value and/or dividends can be used to provide substantial living benefits for retirement or other purposes.
You have to keep paying forever
It just isn’t so. You can design a policy to provide for paying any number of premiums you want to pay, from one up to any number. The shorter you want the paying premium period to be, the more the annual premium would be.
You don’t need life insurance after retirement
Without insurance which continues after retirement, most people will need to take a reduced pension in order to provide a continuing income to their spouse in the event of their death. Insurance will enable them to maximize their pension benefits. Many individuals will have their estates decimated by estate taxes unless they have insurance to pay the taxes. Insurance provides the needed liquidity at precisely the right time and avoids the forced sale of valuable growth and income-producing assets. It enables you to substantially discount the estate tax.