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Life Insurance or Investments? Which one to choose

You work hard for your money so when it comes to putting it away for the future you want to make sure it’s working hard for you. So how do you choose what to do with it? Few of us are born financial savvy but everyone knows that saving a bit for a rainy day is a good start, but if we’re talking about serious planning for the future we’re moving into the realm of insurance and investments. How do you go about deciding which one works best for you though?

You could decide that the best way forward is to take out a whole life cover policy. That would do the job nicely wouldn’t it. After all, it has savings and investment all wrapped up with long term life insurance. Surely that’s everything taken care of, right? Well that remains to be seen.

Whole life cover can be an expensive way of saving and acquiring an investment portfolio. Not only are you paying for insurance cover, there are additional sums for savings and investments rolled into your premium. There are also costs and commission to consider as well. You may find that the premiums for the level of cover you require could be surprisingly high when all is taken into consideration. If you think you may have problems covering that monthly cost at any stage in your life you might be tempted to reduce the level of cover you think you need. It would be better to choose a term life policy and pay less in premiums but ensure the necessary cover is in place.

However, if you anticipate having health problems in the future you may need to reconsider in case you can’t get insured in later years. Whilst term insurance is significantly cheaper there is no guarantee you will be able to renew the term as you get older and become a bigger risk to your insurance provider. If you have a family history that suggests you are prone to developing any number of ailments, whether it’s diabetes or rheumatoid arthritis, you may want to get on board with a whole term policy so that you can be assured of being insured in your later years. Of course you need to consider how long a term you are taking out, some can go for 30 years but you need to ensure you have a clear renewal plan insight for the end of the policy. It would be foolish to pay for 30 years just to find that you cannot extend your cover at the end of the policy, when you are probably going to need it most.

What about if you have quite good health? Would you still benefit from term life insurance:?

Perhaps. It’s difficult to say without being fully aware of the individual’s full circumstances.

Generally speaking the consensus appears to be that with insurance, as with most other things in life, it pays to specialise. Keep your finances separate. Choose financial products that match your ability to save. Decide how much you can afford to save for emergencies. Your savings should be in a high interest rate account rather than not really doing much in your current account. Get a good term policy for a long period if you think that you may encounter health issues. Check with your insurance provider to see if you can get a guaranteed renewal at the end of the term. If you decide to invest then speak to your financial advisor about the best investment plans you can afford for your requirements.

The key is to make sure you know what you need and be open to reviewing which product, or combination of products, is going to best meet those needs.

Jacob Chapman is an independent writer with years of experience in the insurance industry. Currently he shares his knowledge through articles on http://www.mortgagelifeinsurance.org.uk and http://www.lifeassurancequotes.org.uk helping individuals meet their individual insurance needs.