Can I make money buying life insurance?
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Asked October 28, 2015
No matter how you look at it, life insurance is not designed as a tool for making money. While some types of policies to have the potential to earn additional value, the real value of life insurance does not materialize until the person named in the policy passes away and there are regulations to restrict who is able to buy a policy on someone else. Life insurance can make you a wealthy person, but you should not consider it an option for regular income.
Term life insurance does not have any potential for making money for the policyholder. Permanent life insurance usually carries some sort of cash value that increases over time, but the rate of increase is tied to financial markets and you may not see any gains that surpass what you earn by investing directly. Even permanent life insurance policies which have the potential for rapid accumulation are risky at best, and there is no promise of a return above what you invest. Only the payout value of a policy is guaranteed, and that pays out to named beneficiaries.
You could make a substantial amount of money if you are a named beneficiary on a life insurance policy. Beneficiaries must be named by the owner of the policy, but can be any person, place, animal, or thing. For example, a loved one could name you, their favorite pet, and a favorite National Park as beneficiaries on the policy, and even specify exactly how the proceeds are to be decided.
In order to buy a policy on someone else, you have to show an insurable interest. In simple terms, that means you have to show the insurance company how you would be hurt if the insured person passes away. You could be devastated if your favorite movie star dies, but their death does not have any real impact on your life, and therefore you do not have an insurable interest. If the person's death does not have a physical, financial, or emotional impact on your life, then you probably do not have an insurable interest to purchase a policy with.
Answered November 5, 2015 by Anonymous