Is the money I’m paying in premiums better off in a savings account?
Many term life insurance policyholders reach their term limit in their 50s and 60s and face the choice of converting their policies into whole or universal coverage. In a desperate last-minute retirement catch-up environment, many people might be quick to terminate their policy and transfer income they once reserved for premium payments into savings. However, when the return-on-investment of a life settlement is stacked up against two average-performing savings accounts, the results might surprise you.
The Lifeline Program® tested an alternative retirement strategy, similar to a reverse mortgage, and based on the idea of converting a term insurance policy into permanent coverage for the sole purpose of a life settlement transaction. Consider how two simple interest-bearing retirement accounts hold up in comparison to paying premiums in the same amount as a person would put into each of the competing instruments on a $1 million convertible term life policy. The term policy is converted into a whole life or universal life policy at the end of the 20-year term. The return on the life settlement out performs both savings accounts by a wide margin—by at least $50,000. The Lifeline Program® calls this the reverse insurance policy (RIP) strategy.