Insurance…

The number of insurance instruments that can be purchased and added to your investment portfolio has dramatically increased in the last decade as insurance has become more prevalent in the lifestyle of the nation. Insurance is now needed for almost everything, from protecting your home to obtaining medical care to driving legally, and obtaining these types of instruments for investment purposed has increased in popularity as the insurance industry has stabilized. The insurance industry is now a multi-billion dollar industry and opportunities for savvy investors abound.

Many of the insurance instruments that are added to an individual’s investment portfolio are intended to be used for long term growth, not short term gains. The insurance industry is not as volatile as some other industries and the funds available slowly increase in value over time. But there are some ways that individuals can use insurance instruments for short term investment as well.

Many individuals choose to use insurance instruments for short term investment because of the numerous benefits associated with having insurance instruments in their investment portfolio. One of the biggest benefits for holding insurance instruments in your investment portfolio is the tax breaks associated with the instruments. In many cases, the insurance instruments are considered to be an insurance policy for all intents and purposes, meaning that the insurance company that issued the insurance instrument is responsible for all government taxes and fees associated with the value of the instrument.

Another reason that many individuals choose to use insurance as a short term investment is that some of the instruments available can be used as a high yield savings account. A certain percentage of the total value of the instrument can be extracted from the instrument by the investor for use in other pursuits without incurring a penalty for the early withdrawal of funds. For example, an individual that possesses an insurance instrument with a total value of $200,000 can withdraw up to 5% of the total value, or $10,000, as a cash payment to be used for whatever they would like to apply it to.

In many cases, the amount of time that the individual can hold the insurance instrument for investment is dictated in the rules of the instrument itself. Several instruments will only allow the individuals holding them to make withdrawals from the instruments for up to twenty years, after which the instrument must be liquidated and the funds rolled over into other investments. Some of the insurance instruments currently available have shorter maturation dates with higher rates of return, but also possess higher risk of significant loss.

Using insurance products as a short term investment may be quite lucrative for a number of investor that have a good working knowledge about the current insurance industry and the ins and outs of the investment market. Knowing the different types of insurance instruments that are available along with the amount of risk and return that are present with the product will help the individual make the right decision for their investment portfolio. Although the technique is not recommended for casual investors, individuals with large portfolios will be better able to assume the risk that occurs with purchasing insurance products for short term investment purposes.