What Does Insurance Investing Entail?

If you're an investor exploring smarter alternatives beyond traditional bank savings accounts for growing and preserving wealth over the long run, then strategic insurance investing is certainly worth learning about. Let’s explore in more detail exactly what this type of investing through insurance entails and what strategic benefits it can potentially bring to the table.

How Insurance Investing Works

Insurance investing refers to permanent life insurance policies that contain both a death benefit for beneficiaries and an added investment component that allows cash value to accumulate on a tax-deferred basis over time. The way it works is that you make regular premium payments just like you would with a typical life insurance policy. However, a significant portion of each payment gets invested by the insurer into a mix of assets. As those assets generate dividends, interest payments, or capital gains in the markets over time, a percentage of the earnings gets credited back to the cash value account associated with your policy.

Building Up the Cash Value

Typically, the insurance company will invest the pooled premium portions from policyholders into a conservative mix of fixed-income assets like government and corporate bonds that generate interest, along with some equities like publicly traded stocks and mutual funds, which offer the potential for higher investment returns long-term. The cash value account associated with your policy grows through the credited earnings from those underlying assets, year after year.

Accessing the Accumulating Cash Value

One of the key benefits of insurance investing is that the money accumulating in the cash value account can be withdrawn or borrowed against for any purpose you choose, whether that’s supplementing retirement income later in life, funding college tuition for kids or grandchildren, making a down payment on real estate, financing a business endeavor, or anything in between. This concept provides a way to access liquidity from the invested funds if needed, without having to completely liquidate your underlying investments and potentially face fees, taxes, or surrender charges for cashing out.

Now that you know more about insurance investing, you may be ready to get started. According to The Business Research Company, the valuation of the global accounting services market is $868 billion. Be sure to talk with a knowledgeable financial advisor who can guide you on whether adding in insurance investing appropriately matches your risk tolerance, time horizon, tax situation, and financial objectives. When the time comes, Kingsbridge Brokers is here to help you. Call now to learn more.