Should You Buy Term Life And Invest The Difference?

For years, most people bought permanent life insurance. They assumed that buying a policy that guaranteed a payout made better sense than buying temporary coverage. Term life policies were often provided by employers, and only covered you while you kept your job.

In recent years people have begun to take a different approach. They’ve been buying term life, investing their money, and then going without life insurance during retirement.

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It doesn’t make sense for everyone. But for some people, it’s a smarter way to protect their families.

How Does It Work?

Most permanent life policies have high premiums. After all, the majority of them will pay out a benefit eventually. If the company that writes the policy is going to keep from going bankrupt, they need to be taking in more than they’re paying out.

But term life only covers you for a certain period of time. And most people who have term life insurance will outlive their policy. That means far fewer payouts for the insurance companies. And it means lower premiums for people who buy term life — sometimes as much as five times lower. Many experts suggest that you buy term life insurance to cover you during your working life, and then going without life insurance when you retire.

The idea is that when you’re young, you don’t have a lot of money. If you were to die, there would be little savings left behind to cover your family’s expenses. So having life insurance makes sense. But with term life, you can take the money you save on the lower premiums and invest it. If you invest it carefully, by the time you retire you’ll have saved more than enough to cover your family’s expenses. This is called self-insuring.

Is It Right For You?

If done right, this can be a good strategy to protect your family, invest for your retirement, and save money.

It won’t work for everyone. Specifically, this strategy assumes that:

• You’ll have the discipline to invest the money you save, and not spend it elsewhere
• You’ll have the time to educate yourself about making smart investments
• You’ll be able to pay off your debts and other financial responsibilities before you retire

If you think this strategy might be a smart way for you to plan for your future, talk it over with a professional insurance agent. You can get matched with agents in minutes, just by filling out this simple life insurance quote form.