hr: Money

Photo Credit: timtom.ch

There are a lot of people who see life Insurance as an Investment. Some of them are very close to me, and are stuck in long term policies that are touted as great investments. This is so patently false, that it’s a miracle that agents selling Life Insurance have got away with it so far.

The first reason is common sense (More specific reasons are listed below!) - It’s too good to be true! What agents selling this stuff are telling you, is that you can essentially have a great equity linked investment, and be covered with a death benefit. Your alarm bells should be ringing by now already. Nothing comes for free, and if it sounds too good to be true, it usually is.

Life insurance carries hefty fees, costs, and commissions that erode your returns. This makes some sense, as otherwise, how would life insurance companies make their money? What about the agent who sold you the insurance? He gets a commission as well.

I’m not against Life insurance per se. I understand that it provides a layer of security in case of mishap, but I certainly do object to calling it a mainstream investment, and to make matters worse, calling it better than other long term investments. You need to buy life insurance for the right reasons. Not as an investment option.