Wheeling , IL (PressExposure) August 25, 2010 -- AccuQuote, a leader in providing term life insurance quotes to people across the United States, explains reasons why life insurance should not be treated as an investment vehicle.
Most types of life insurance policies fall into two categories; term life insurance and permanent life insurance. Term life insurance is pure insurance. It provides coverage for a specified number of years; the term. For example, a term length of 10, 20 or 30 years. The beneficiary only receives the death benefit proceeds if the insured dies before the term expires.
Permanent life insurance provides coverage for the insured's lifetime, or to age 100. In addition to providing a death benefit, permanent life insurance builds a cash value element. As a result, permanent life insurance is much more expensive than term life insurance.
The confusion? Consumers tend to think of permanent life insurance as an investment, or a way to save for future financial needs. The fact is, the cash value element built into a permanent life insurance policy does not grow as quickly as traditional investment tools.
"In its simplest form, life insurance is income replacement," says Byron Udell, founder and CEO of AccuQuote. "Most families use term life insurance as a tool to replace the economic loss of a loved one. It isn't used as a tool to save for college, retirement or a tax-free loan later on in life. Although permanent life insurance may seem like a reliable savings option for those needs, there are better investment vehicles available."
AccuQuote's advice? Consumers should consider buying an economical term life insurance policy and investing the difference they would pay for a permanent life plan into a higher earning investment account.
For more information about the differences between term life insurance and permanent life insurance, contact one of AccuQuote's licensed life insurance professionals at 800-44-9899.