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Question:


Should life insurance be a part of my investment portfolio?
-LukeSky


Answer:


This looks like a trick question or maybe just two questions rolled into one: Should someone have life insurance, and is life insurance a good investment? The answers are probably and probably not. If you have anyone depending on you financially, then life insurance is definitely a good idea. Your loved ones will be taken care of if you die and, as a fringe benefit, you will have the peace of mind of knowing that such unpleasant business has been sorted out.
 
Many insurance policies, known as whole life and by such other names as universal life, limited pay and endowment, build up cash value that policyholders can realize while still alive and kicking, so there is an element of investment to life insurance. The different kinds of policies accumulate cash at different rates, mainly because the contracts call for premium payments to be made at different rates. The returns on the premiums are often fairly low on all types of policies, however, compared to what is available on conventional assets such as short-term bonds or money-market instruments. So while life insurance is a good financial-planning tool, it is generally not a good investment.
-Conrad de Aenlle



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