While the financial literacy of the average American is higher today than ever before thanks to a generation or more of emphasis on understanding retirement savings and regular investing in school and the workplace. This has led to a population more willing than ever to spend time learning about investment options and finding the right combination of them for their own personal growth strategies. It’s also led to a change in the way investments are evaluated, with many people evaluating them purely based on a risk to return ratio, and that can be a mistake, but it’s one that there isn’t as much effort to correct. Diversifying into products like whole life insurance can be a good way to circumvent that issue and recession-proof your portfolio, but term life policies can be cost-efficient ways to manage risk without undercutting your emphasis on other investments..
Life Insurance Policy Types
Whole life policies are great because they work as a savings fund with a guaranteed return in the form of minimum interest, making them one of the few products to do so. Usually, the interest rates fluctuate from year to year, but some policies will lock in a rate permanently in the contract. Both approaches have advantages and disadvantages. Flexible rates can pick up much better interest performance in the right years, but they’re prone to decreased earnings when rates go down. A fixed rate means you can predict exactly how much will be in the fund in 10, 20, or even 30 years, but you won’t gain extra interest when rates go up for others. Understanding these nuances is important when shopping for life insurance Newark DE.
Term life policies offer the risk protection of whole life, but for a specified and limited term, after which they can be renewed or released. Their structure is different, and the policies don’t always work as investment vehicles in addition to risk management instruments, but there are some designed to do so, particularly those that combine elements of traditional term and whole life policies.