Insurance-based investment products can be an important component of a diversified investment portfolio. By providing principal protection and guaranteed returns, these products can help balance the risk of more volatile assets. Choosing suitable insurance products requires understanding their key features and aligning them with your investment goals and risk tolerance. This article summarizes the main types of insurance based investments and their characteristics to aid your selection.
Fixed annuities offer minimum guaranteed rates with flexibility
Fixed annuities provide a minimum guaranteed interest rate and return of principal. The initial rate is locked in for a period, often 1-5 years. Afterwards, the rate may change annually based on market conditions. Variable annuities offer investment options like mutual funds while protecting against market losses. Indexed annuities provide upside potential from stock index returns while limiting downside risk.
Universal life insurance allows adjustable premiums and coverage
Universal life insurance combines a death benefit with a cash value account that earns interest. It offers flexible premium payments and death benefit adjustments. Premiums beyond the cost of insurance go to the cash value, which can be withdrawn or borrowed against.
Equity-indexed universal life ties cash value to indexes
Equity-indexed universal life insurance links cash value growth to the performance of stock market indexes while guaranteeing your principal. It provides upside potential with downside protection, making it appealing for supplementing retirement income.
Whole life insurance builds guaranteed cash value
Whole life insurance offers guaranteed death benefits along with steady cash value growth at a set interest rate. Its long-term safety and stable returns are well-suited for conservative investors using it as part of their fixed-income allocation.
Insurance products like fixed annuities, equity-indexed life insurance, and whole life insurance can provide principal protection, guaranteed returns, and downside risk management to balance a portfolio. Assessing your risk tolerance, time horizon, and goals can help determine which insurance investment options suit you best.