How to Use Life Insurance as an Investment

Everyone buys life insurance with different goals in mind. Mapping out these goals ahead of time can help you narrow down which  type of life insurance is right for you and which benefits you are looking for.

If you are hoping to establish financial security for your loved ones after you pass, investing in some type of life insurance is worth it. You can support your living financial goals with a life insurance investment using the cash value component – these policies are not just limited to helping protect your family after you're gone. Read on to learn how a life insurance investment works and some types of policies that let you leverage cash value.

Types of Life Insurance Investments

Some types of life insurance policies you can use as an investment include: 

Whole life insurance

Whole life insurance is a type of permanent policy that lasts the entire life of the policyholder. Aflac’s whole life insurance provides whole life coverage and offers the policyholder the ability to accumulate cash value in a tax-deferred account.²

In some cases, you may be able to borrow against this value in the form of a loan. This value grows at a higher rate because taxes aren’t taken out, giving you greater borrowing potential.³

Universal life insurance

Universal life insurance is a permanent plan that gives you flexibility. You can increase or reduce your premiums, cash value, and death benefit as needed.

Variable universal life insurance

With this type of permanent life insurance plan, you can invest your cash value into different kinds of funds and indexes of your choosing.⁴ Like universal life insurance, you can adjust your premiums and death benefit.

Indexed universal life insurance

Indexed universal life insurance also allows you to invest the cash value component, which can grow based on stock performance. This type of plan offers flexible coverage that will last your lifetime.

Is a life insurance investment worth it?

Using life insurance as an investment can be worth it if you want added financial security for you and your family. The cash value component can give you access to funds as needed, whether you want to withdraw funds, take out a policy loan, or supplement your retirement income. Compare types of permanent life insurance policies and the coverage they offer to decide whether a life insurance investment is worth it for you.

How a life insurance investment works

Life insurance with cash value can be used as an investment tool. As you pay premiums, a portion goes toward your cash value, which will grow over time. Once you’ve built up enough cash value, you can access it in several ways, including getting a policy loan and withdrawing funds. Permanent life insurance policies like whole and universal life insurance offer cash value that can make them useful investment tools.

Ways to use life insurance as an investment

Here are some ways you can leverage your life insurance policy’s cash value while you’re still alive:

Get a life insurance policy loan

Once you have sufficient cash value, you can get a loan from your life insurance policy using the cash value as collateral. With a policy loan, you can pay back what you owe at your own pace. But if the loan amount exceeds your cash value, your policy may lapse.

Withdraw funds from your policy

The cash value component also allows you to withdraw funds from your life insurance policy. You can use these funds to cover any expenses. Keep in mind that withdrawing from your cash value will reduce the death benefit.

Supplement your retirement income

If you save up enough cash value, you can add it to your retirement portfolio and use the funds to supplement retirement income. Consider growing your cash value for several years before tapping into the funds to grow your nest egg.