Is it a wise investment decision for me to pay $55/month for a life insurance?

Question

I am a 25 year old college student. I am not worrying about the coverage, it is a nice one, but rather $55/month I could invest somewhere else or put back in a bank.

Answer 1

ALWAYS buy life insurance as young as you can afford it. Buy a whole life policy and lock in the cheap rate for as long as you live, no matter how bad your health may get later. Just because you don't have dependents now, you'll be glad later on that at least your life insurance is cheap while you're shoveling money out every direction for kids, a mortgage, cars, tuition.....

$55 sounds a bit high for even whole life at your age unless you smoke or have other health issues. By all means get something going, but keep shopping for a better rate, it should be out there. If you know this is the best rate you can get, you better take it.

Answer 2

Life insurance at your age is a very smart move. Whether you need it or not now, you are guaranteeing your insurability in the future incase you develop an uninsurable illness.

As far as, is it a good investment, life insurance isn't necessarily intended to be an investement. Whole life and universal life policies do earn cash value that you can withdraw or borrow against in the future, but do not often earn as much as an investment in stocks or mutual funds can.

A very wise move for you now, would be to speak with a life insurance agent who has their securities license. They can help you decide what kind of life policy is best for you and can even write policies who's earnings are based on the stock market and therefore earn much more over time than a traditional life insurance plan.

If you go to a banks financial adviser I can almost guarantee you they will advise you to drop the policy you have, take out a term policy and invest the rest in one of their products. This may earn you more in investment value, but if you are not in excellent health when your term policy expires, it is going to cost you a tremendous amount of money to purchase another policy.

Answer 3

I think you would do better to invest the $55 per month into a tax-defered investment like a ROTH. If you are able to average 12% annually from a mutual fund, by the time you are 65 years old, you'll have over half-a-million dollars accumulated! Don't buy insurance until you have to, like once you are married, have kids and buy a home.

Answer 4

Well, depending on how much coverage you have, $55 could be a bad or good investment. Its good if you have $500,000 or more of coverage. Bad if you have just $100,000 or less coverage.

I hope your life insurance doesn't contain any cash value or savings in it. If it does, you are going to be screwed. Why? If you die, your family only gets the death benefit and all the savings are kept by the insurance company.

Answer 5

It seems like a fairly reasonable rate, it's pretty standard. I've looked into extended health care and dental insurance in Canada and that's generally the going rate.

If you could maybe increase that to $80 or $100 per month, I would suggest speaking with a financial advisor at your bank about putting together an RRSP consisting of stable, solidly performing, medium- to low-risk mutual funds, term deposits, and government savings bonds. In the U.S. of course, I believe your equivalent of an RRSP is an IRA or Roth IRA.

You're young, only two years older than me. The RRSP (or IRA) allows you to save for retirement or other emergencies and may allow you to deduct what you put into the plan from your current year's income, thereby reducing your total tax burden and likely increasing your income tax refund. You only pay the tax on the amount that you pull out of the plan at any one time. You can than invest that income tax refund in the next tax year into your RRSP. Plus, you are constantly earning interest on your investment income in the plan.

This is only basic knowledge, and as always, please consult a tax guide or speak to a tax advisor about your annual allowable contribution limit to the plan and what tax advantages there are with an IRA or Roth IRA.

It just seems like a faster way to grow your money. Plus, it's often touted by financial advisors and even tellers that if you invest when you're 20 and contribute something like $1,000 per year for six years, it could turn into close to a million dollars by the time you reach age 65. What life insurance policy will do that? Or, rather, one you aren't paying an arm AND two legs for to get a million dollars coverage. ;)

Answer 6

yes. It's a very wise investment because you're starting at an early and healthy age. Make sure you lock in at that rate or they will keep increasing your premium over the years. Then, if you ever get sick, you won't have to worry that you'll be turned down for life insurance because it's already been taken care of. It's much better to plan for those kinds of things, rather than have that added stress should something unexpected happen.

Answer 7

That seems like a lot, but hard to tell without knowing the total value of the policy. I am 35 and pay $150 a year for $120,000 of coverage. Do you need life insurance? Do you have a lot of assets or children? Does your employer include coverage with your benefits?(you may not have one being a student)

Answer 8

If you are healthy looking at term life insurance for a value of approx $250,00 it is too high. It is wise to get life ins at a young age, get a 30 year term, you never know what could happen (illnesses) making you ineligible for a low rate.
Sounds like you may be looking into a whole life policy, in my opinion, those don't build enough equity, the interest rates are better in a savings account in most cases. Check into term life ins.

Answer 9

Surge, no one on this message board can tell you if you have a good 'deal' or what type of life insurance will work best for you or the amount that you need UNLESS you post all of your personal financial information here - current income and savings & debts, married, children etc etc.

Go talk with a licensed financial professional about your financial future - your goals, needs etc. Expect to pay a fee for a complete financial 'game plan' for your life. Talk with more than one if you need to.

Answer 10

depends on what type you have, Trem or whole life aka cash value. Trem is a good investment only have for the time you need it 10yr 20yr or 30yr. if it is whole life which pays out only if you die or when you hit 99 its useless. best to just buy Trem which is a more coverage for half the price. so buy Trem and invest the diffrence maybe in an IRA or something :)