Can a whole life policy with a paid up additions rider be a great investment?

The policy will be a dividend paying policy. Banking on yourself is the concept behind this whole life policy. It takes approximately 5 years to fund this policy and anytime thereafter the money can be used to buy big ticket items such as cars, bikes, travel, etc.. The interest you would normally pay to the banks and credit card companies is paid back to you.

Investments with any life insurance policy are never a great investment. First of all, all your investments are being paid toward your life insurance, not for retirement. This means, if you ever miss a payment, your investments in the policy can be used to pay it. In this phase, you have borrowed money from your investment and must pay it back. If you don't and you die, this will be deducted from the face amount. In the event of your death, all your investments in the policy will be kept by the insurance company and your beneficiary will only get the face amount (less any miss payments and money borrowed from investments).

I think you are confused what is a dividend paying policy. This is not the same as dividends in the mutual fund business. In life policies, if you receive a dividend, that means you are overpaying your premium. They use the word "dividend" just to make it more attractable to you.

In mutual funds, if you receive a dividend, that is because there were profits made in the fund and so the fund managers distribute it to all shareholders.

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No, Jimmy. Whole life policies pay a whopping commission to the agent who sells them, so agents will push them and tell you anything to get you to buy them. You're always better off buying the term insurance, then taking the extra money you would have spent on the policy and investing it otherwise, such as in money markets or a mutual fund. It's still your money and you've invested it.....but you'll get a much better return on that extra money. Plus.....none of it's funnelled into commission.

not true. term policies pay a whopping commission as well. whole life policies accrue value, term does not, but you're going to pay probably 4x the term amount every year for whole life. the interest rate you're talking about is actually about a percentage higher or more right now than bank loans for loans against the policy, which if you are buying big ticket items can cost you more money in the long run. if you want a whole life policy look at it as an investment for the time that you will really need it, retirement, not 5 years. but in the long run, as was said previously, its your money and its your life.

Really depends on the policy.
There are some good investments in whole life, if you can afford the large premiums.
And I beleive you can borrow against them as well.

But you probably alread know that.

No insurance policy is a great investment. It is good to have for obvious reasons, but it shouldn't be used as an investment. Search for investments elsewhere.

No, whole life is a massive ripoff. If you want to "invest in yourself", open a mutual fund and put HALF of what you're being quoted into it, as if it were a life insurance payment. You'll have TONS more money in the end.

The problem with buying term and investing the difference, is first, most people do not follow through, second, if it is cash value you are looking at you would have to get a before tax return generally around 5-7%. That being said, it is possible especially as interest rates continue to increase. Paid up additions is a good way of increasing the DB without having to go through additional underwriting. Yes, it will increase premiums, however it can work well. If you are looking at using cash value to take tax free loans on I personally would recommend looking at Equity Universal Life Policies. They are usually about 20-40% less expensive as whole life, and depending on how you fund them ie. how much premium you put in say similar to what you are looking at in the whole life, you have the opportunity to have more cash value available. Most importantly, if taken as a loan, this is tax free. When you take a withdrawal, companies will give it to you first in last out. If you have more questions or further clarification, mattb@benefitsblvd.com.

life insurance policies are never an "investment"!! the only person or persons that will see money from an insurance policy are the beneficiaries after the death of the insured.

you can accrue a limited cash value on any permanent insurance product, at which point you can take loans on that cash value witch need not be paid back by the insured. keep in mind that when/if the final death claim is made, the loan amount will be deducted from the death benefit before any payment is made to the beneficiaries. also, any loan on policy value affects the cash value and therefore amount of dividends that accrue on that policy. and, if the cost of insurance increases, which it will as you age, the reduced cash value may not be enough to keep the policy in force if there is a large loan balance. if the dividends are used to buy paid up additions, you will not receive any interest directly, period. the only time the insured/policy owner will receive the dividend interest in cash is if the dividend option is "paid in cash"

A decade ago in NYS, agents got into some really large trouble selling life insurance as "investments". Some really big, big companies paid some really large, large fines.

If you need life insurance, then buy life insurance. If you want to invest and grow your money, maybe mutual funds would be a good place to look.

As for the life insurance option, 'Paid up additions' make the benefit paid out when you die a bit larger. A dollar of value in a "paid up additions" rider will buy more death benefit than the dollar would buy in your checkbook . For example, maybe a dollar will give you a $1.25 in death benefit - it all depends on your age and rate.

Now, I can't speak for all states or all companies, but generally "loans" taken from life insurance policies (like for 'big ticket items' ) accrue interest charges and that "principle & interest" balance would be subtracted from the pay-out when you die. So if you borrow and never pay back, these interest charges and loan balances can snowball into more money than the policy is worth, effectively cancelling out any benefit that would be paid in the event of your death.

Shop carefully - maybe talk to more than one agent and with more than one company.