People often make the mistake of identifying life insurance as a positive investment. Actually this is incorrect. Positive investments are those like investments in property, shares, mutual funds, bullion etc. Sell them and book profits whenever their market value is higher than that when they were purchased. Life insurance policies are not the same.
If one checks out statistics, they will find that approximately 90% of life insurance policies are paid pre maturely, on the death of the insured. The insured will no longer be there when the time comes to collect the maturity amount, even though he has spent a major part of his life paying premiums. The texts of the insurance company's documents are cleverly worded. Their agents are also the same. They will induce you by telling that in the ill-fated event of your death, the total insured sum will be paid to the beneficiary that you will appoint..
How does the insurance company stand to gain? Why should you sell your life insurance policy? If you expire prior to the completion of the term of the policy, the sum assured is given to your beneficiary. If you do not die till the time of maturity of the policy, you also get the assured sum, right? Wrong Special bonuses and incentives that are as much as the sum assured is also given to you.
Say you have a life insurance policy of $250,000 and you expire much before the policy maturity date. In such a scenario your beneficiary will only receive the same amount plus a small bonus amount that is calculated by the insurance agency. The amount paid will be less than the insured amount, in certain cases when the insured passes away within 2-3 years of starting the policy.
Compare this with the $500,000 you would have received had you managed to stay alive for the term of the policy. Few persons manage to do so, hence it is wise to sell your life insurance policy and invest it in something that you can redeem whenever you like. You can either surrender the policy to the insurance company for a paltry sum of money. Or you can sell your insurance policy in the open market for a greater sum by opting in for life settlement.
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