It should be started with that a lot of financial advisors cast serious doubts on the investment potential of a cash value life insurance policy and the reason is obvious. You see, due to Moshe Milevsky, professor of Finance at Toronto’s York University, “policies that combine insurance with an element of investing- such as whole life and universal life-earn a lousy pre-tax return.” Try should understand that rather then trying to get a financial return on the money you spend on premiums by mixing investing with insurance, you should realize that what you’re really purchasing is protection and then seek a way to get the most bang for you buck.

Things to consider regarding dividends

You should clearly understand that the dividends paid on life insurance policies are not the same as other kind of investments. The point is that life insurance dividends paid to policyholders result from an overpayment of premiums paid on a participating policy. It should be also pointed out that the amount of dividends paid depends upon company discretion, based on its expenses and profitability in a given year. Pay attention to the fact that dividends are not guaranteed!

As a matter of fact a lot of people are under the impression that dividends are some type of profit on their investment. But, the truth is they’re only returning some of the money you over paid on premiums and that is the reason why you don’t have to pay income tax on them.

Things to consider regarding borrowing from your policy

It is often used as selling point for cash value policies, so it is important for you to know the following things:

Firstly, you need to keep in mind that interest is charged on a policy loan, even though it may be lower than what you’d pay for a traditional bank loan. However, you have the opportunity to withdraw your earnings without paying interest in the case your money is accumulating in another investment fund.

The second point you need to be aware about is that loan may reduce your death benefit. In other words in the case you borrow from your policy, but die before you’re paid back the loan, your death benefit will be reduced by the amount borrowed. But with term insurance and a separate investment fund, withdrawals from saving do not affect your life insurance protection.

Thirdly, potential tax benefits are often used as a selling point for some cash value policies. But as with any other investment, you should exercise caution when a large portion of the benefit is based on complex tax law considerations.

Additionally, you need to know the following:

1. Tax laws are considered to be changeable subject. You cannot be sure that these current so called tax breaks will be there when you need them.

2. These potential tax benefits are based on complex assumptions. It means that you may be subject to future tax liabilities that could dwarf any promised benefits if the case is that your situation varies from the norm.

3. You should also keep in mind that relying on promised tax benefits to justify any investment is risky. It would be wise step to make when considering the tax consequences of your investments to seek the recommendations of a qualified tax expert.

The other important question that must be answered is: How do you know what you are paying?

The point is that this can be hard to determinate in a bundled product, especially with universal and variable life. It should be also added that to the cost of death protection, whole life policies have significant fees.

Keep in mind that with the ‘two-in-one” approach, it’s complicated to separate the cost of insurance from the other elements of the policy and it makes comparison shopping difficult at best. Needless to say that you risk making a bad decision any time you’re not sure what you’re paying.

P.S. Ask your financial advisor about investments into silver bullion or how to choose a reputable forex managed accounts service.

For those who prefer HYIPs - read the review of Stable Interest and if they still pay.