Use insurance as an investment

What you need to know to Use insurance as an investment.
Permanent insurance is different from its more common cousin, term-life insurance. The premiums you pay for permanent life insurance are much higher than for term life, but the payoff is that your policy accumulates cash value over time.

This cash value then earns interest and/or investment income that builds up tax-free. As long as you pay the premiums and the insurer stays in business, the policy sticks around until you die, so use insurance.

There are three basic types:

• Whole life. A policy with a fixed premium, a guaranteed death benefit and a guaranteed return on cash value. This insurance offers safety, but don't expect soaring returns, so use insurance.
  
  
• Universal life. Similar to whole life, but your fixed premium is split up into a payment for your death benefit and a portion for investment. The latter portion is put into a mix of fixed-income investments chosen by the insurance company. Your heirs benefit if the investments do well. But even if investments lag, heirs receive a minimum benefit, so use insurance.
  
  
• Variable life. Your fixed premium is invested in a basket of stock, bond and money market funds chosen by you. The benefit and value of the policy fluctuates with the performance of the funds, so use insurance.

Read more!

How to Use Insurance

You can make your insurance policies really work for you by taking advantage of the insurance coverage those policies offer that you may not even know about — and, in the process, avoid paying for unnecessary coverage.

• Trailers: Use Insurance If you own an expensive camping trailer, you can insure it best and most economically by adding the trailer to your car insurance policy. Because car insurance covers only the trailer, add Special Perils contents coverage to your homeowner’s policy to get better coverage for the belongings in your trailer in case of damage from a collision or overturn.
  
  
• Instrument rentals: Parents commonly rent instruments instead of buying them, especially for the child’s first instrument. The rental agency requires you to insure the rental. Use Insurance under your homeowner’s policy for $4 to $8 a year (as opposed to the rental agency’s insurance, which can run almost $100 a year). Be sure to include the rental agency as Loss Payee on the schedule so its interest is properly covered.
  
  
• Valuables: Use Insurance If you have any kind of property that’s quite valuable and could be stolen, such as jewelry or fine paintings, install a central burglar-and-fire alarm. Installation costs are often $200 or less. The monthly cost to monitor the alarm is about $20. You reduce the risk of losing an irreplaceable treasure, and you receive 10 to 20 percent off your homeowner’s rates.

Read more!