Using Life Insurance as an Investment

Whole life insurance policies often include features that make them attractive investment vehicles. While most people understand term life insurance – the kind of insurance that pays out a benefit when someone dies or suffers another defined catastrophic loss – whole life insurance, the type used as an investment, is much more confusing. The major difference between term life insurance and whole life is that term life insurance expires. If the insured person lives past the date of the term – the expiration date on the insurance policy – the life insurance policy is worthless. Whole life insurance on the other hand, builds cash value by using part of the premium to fund investment made by the insurance company.

Investment gains can be used in a number of different ways. They may increase the death benefit, they may keep the policy in effect after you stop making premium payments or you may borrow against them when you need extra cash. In some cases, whole life policies may pay out monthly dividends after a certain point if they are connected to annuities or other investment vehicles. In addition, there are tax benefits to investment made through a life insurance policy. These are some of the facts you should know about using life insurance as an investment strategy.

Tax Benefits of Life Insurance as an Investment

Variable life insurance policies offer a number of important tax benefits on investment income. In general, investment earnings are tax-deferred in the years in which they are earned. Taxable gains can be reduced by the amount of life insurance protection provided by the insurance policy, and if the policy holder dies, the investment gains are generally not taxed at all. This makes life insurance a popular investment for earners who want to protect their estates from estate taxes. In addition, there are many types of investment indexes and opportunities from which you can choose, including stocks, bonds, mutual funds and money market accounts.


A life insurance policy used for investment offers a great deal of flexibility for the investor. The earnings in the investment may be used to increase the death benefit, to pay premiums or can be borrowed against if you have a medical emergency or other pressing financial need. In many cases, you can shift your investment account to more aggressive or more conservative options based on your needs or your stage of life.

We can help you with a variety of whole life, variable life and universal life insurance investment vehicles. Check out the offerings available and talk about your needs with one of our agents to find out how life insurance can be a good investment for you.