Is Life Insurance the Popular Investment Option?

Life insurance makes sense for families. If the main breadwinner is absent, the family has to cope without that salary. Term life insurance pays an agreed benefit after the death of the insured. This should enable the family to compensate for the loss of income. However, even if the partner dies, who mainly brings up the children and is therefore only rarely or not at all employed, there are additional costs for raising children that have to be shouldered.

The Popular Investment

Life insurance policies have long been a popular investment. Old contracts that customers concluded many years ago can still be attractive because of the high guaranteed interest rates. Endowment life insurance policies are inflexible, non-transparent and mix death protection with a savings product. Even in better times, many experts have advised against them. With endowment life insurance, the customer pays monthly or yearly premiums to his insurance company. The insurer deducts part of this as costs, part goes to cover the risk of death and part is saved. This remaining savings portion earns at least a guaranteed interest rate. If the insurer invests the money well, there are surpluses.

Today, instead of endowment insurance, private pension insurance is usually the ideal option. With a classic private pension insurance, there is a savings phase and a pension phase. In the savings phase, the insured person pays monthly or yearly contributions to the insurance company. The insurer deducts part of this as costs, the rest is saved and interest is paid.

Guaranteed Interest

 this way, the insurer relieves the customer of the investment risk and guarantees that his money will increase. The customer could also become active on the capital market himself, but there he would have the risk of investing his money poorly and losing it. However, only the (low) guaranteed interest rate is guaranteed. If the insurer has a good investment strategy, there are still surpluses. At the beginning of the retirement phase, the capital saved is either paid out or converted into a lifelong pension.

The “longevity risk” is protected

Of course, the saver himself could divide his savings by 20 years and slowly use them up. But he has the “risk” that he will live ten years longer. Then his money would be gone. On the other hand, the insurer protects its customers by relieving them of the “longevity risk” and guaranteeing a lifelong annuity. With these guaranteed benefits, the customer can plan his or her pension sensibly. Of course, such pension insurance is only a good idea if the insurer deals fairly with its customers. If they grow older than average, the insured must get more out of their guarantee plus surplus pension than they paid in. However, this is not always the case due to high costs and unfavorable capital investments. It is best to speak to a reputable Insurance Company in Miami to understand your options.