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Why Whole Life Insurance Is A Bad Investment

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When you hear the term ‘whole life insurance,’ it only has positive connotations. After all, you are going to be covered for the rest of your days. Hip hip and hooray! But, underneath the surface, there are risks just like any investment. In fact, a whole term life insurance policy often doesn’t work out for the best in most cases. Yep, it turns out you are better off considering your options and here are the reasons why. 

Life Insurance

It Doesn’t Diversify Your Portfolio

Unless you have money to burn, which no one does, the key to a successful investment is diversification. When you have resources in a variety of investments, the chances of losing money is lower because a mistake won’t make a massive difference. However, this isn’t the case with a whole life policy as it requires an individual to invest a large sum with one firm. As a result, you are vulnerable and could lose everything if the company goes bankrupt. Even worse, they might not pay out at all if there have been oversights in the past. As a rule, no one should invest a chunk of their budget with one entity. 

Short Term Is More Flexible

Of course, everyone would want to invest in a golden policy that pays out in the long run. Even if this was possible, the average person does not have the money to commit to such a venture. If you are honest, it is easy to admit that there are times when your wage doesn’t go far enough. In fact, there might be times when you don’t know from where your next mortgage payment will appear. When these scenarios play out, there is no reason to pay for a fixed term policy. Rather, it is better to have a flexible policy that allows you to opt in and out whenever you need. 

You Are Good At Saving

According to the experts, one of the benefits of whole life is the saving aspect. Quite simply, it allows you to save the money that you can then use to self-insure later on. Think of it like how a mortgage forces you to buy equity in your house. However, this is only a positive if you can’t save the money in the first place, so those who can don’t need to bother about investing in an expensive policy. If the idea of doing it alone seems too complicated, contacting an insurance advisor is a simple and easy fix. Then, you can concentrate on putting a small amount away each month to reduce the overall cost of the policy. 

They Are Complex

To a layperson, every insurance policy on the planet is complicated. However, whole life policies are worse than the average because the sellers don’t want you to understand. You see, the less you know, the better it works out for them in the short, medium and long-term. The odds are that you will make a mistake, and that error will end up making the policy void. Unless you know a guy or are incredibly clever, it is usually better to steer clear. 

Although it sounds like a good deal, it usually comes back to bite the investors on the backside.