Focused on maximizing your gains, many financial counselors advise, “Life insurance is a terrible investment.” When the Dow-Jones industrial average climbs 20% in one year and whole life insurance policy earns only 2%, why would you choose to live with that ten-fold discrepancy? It defies common sense, the advisors emphasize; and their logic speaks for itself.
However, financial advisors’ numbers game overlooks two critical factors that influence your decision to insure your life: First, the advisors conveniently neglect the glaring fact that the Dow-Jones plunged by nearly half its value in 2008, so that a 2% gain would have looked and felt just fine. Most investment products put your money at risk, whereas a life insurance policy steadily builds cash value and assures reasonable liquidity after an initial “accrual” period. Second, and much more importantly, aggressive financial advisors neglect the purpose of insuring your life: You do not buy life insurance to build your wealth. You take out a policy for yourself and another for your wife to protect your wealth. When you buy a whole life policy, you make certain that your family can maintain its quality of life no matter what happens to its two primary income-providers.
The purchase of whole life insurance marks one of life’s passages to adulthood, because it indicates you are set in your career, have married, purchased a home, and brought a child into the world. You actually have significant “net worth” and “equity,” which you should protect against the unthinkable.
Some “insurance” products do serve as effective investment tools as they provide death benefits and rights of survivorship; but they do not strictly qualify as “life” insurance. Instead, they are sold as annuities, and they work better for retirement savings than for protecting your assets against your premature demise. An experienced insurance broker can show you the full array of insurance and investment options specially designed for young families who just have purchased their first home and delivered their first child.