Many arguments have been put forth especially by insurance agents that life insurance is a complete, perfect and balanced financial program by itself. Personally, I do agree with the argument although there are many differing opinions against it. But surely, most cannot deny and acknowledge the fact that life insurance is simply great and supreme as a savings and accumulation vehicle as well a retirement plan.
There are many reasons for this argument and I would like to put forth six logical reason why life insurance is simply as a great savings and retirement plan rolled into one as summarized below:-
1. To maintain the life insurance policy, the policy holder is required to make the periodic payment regularly and consistently to prevent the policy to lapse. Herein, lays the secret of forced savings and systematic accumulation to achieve your financial goals.
2. Records have shown that for life endowment policies of medium to long term say 20 to 25 years, the projected yield is around 4 to 6%. This is certainly superior to the low prevailing interest rates that banks offer these days. Based on the difference in the savings rate of banks, and the compounding effect, insurance is certainly considered as a better than an average savings vehicle.
3. In many countries, the returns from the life insurance policies are generally tax free. Due to this advantage, its returns will certainly be superior to that of bank deposits.
4. Life insurance has always been regarded by investments experts and financial planners as a moderately low risk investment. Hence, it certainly has a vital role to play as an asset allocation alternative in building a balanced investment portfolio in the retirement plan.
5. The use of life insurance as retirement tool can start very early in life, almost immediately after your first pay check. As the nature of a life insurance compels people to save systematically, you can be assured a sizeable retirement account at retirement.
6. In recent years, investment linked life insurance policies have become very popular in the insurance industry. These types of policies allow you to systematically invest into the financial market to achieve even higher yield for your savings when compared with your money deposited in the banks.
Life insurance has been a wonderful creation. The contribution of life insurance to the world had been immense. The logic that the instance you purchase an insurance policy, you have created an immediate estate for your family makes life insurance such an important element in the financial planning process. Needless to add, as supported by the above reasons, life insurance can truly be considered as a great savings and retirement plan.