“One of the purposes of the investment component of an insurance policy is to build financial resilience and is an ideal long-term savings for retirement income. Consequently, persons should not hesitate when it comes to purchasing insurance that come with an investment option,” says Othneil Blagrove, Senior Manager, Sales JN Life Insurance Company.

Mr Blagrove points out that life insurance is designed to offer financial safeguards against the death of the policyholder, but it may also work as a good investment plan, which helps persons to meet several life goals.

“Investing in a good life insurance plan can ensure that you have additional retirement income when you are no longer able to work. Also, it can act as a rainy day fund for items such as school fees, emergencies and other needs that may arise,” he stated.

“While we in the financial industry encourage persons to take out policies with investments, we also advise them to look at other forms of investment since life insurance was meant to be used primarily for medical emergencies, or in the event of death. Therefore, it should form a part of your investment portfolio and not your only investment,” he added. 

Mr Blagrove explained that over the years, several policyholders have used their policies to accumulate funds to invest in the stock market or in other plans. However, he points out that whatever the reason, the funds represented a good form of investment.

He added that despite having multiple uses, investments from policies should not be encashed unless they are extremely necessary.

“The funds that are built up on a life insurance policy are usually earmarked for specific reasons depending on one’s financial goals throughout their life cycle. Ultimately, it provides retirement income so a policyholder should seek to preserve it as much as possible. If they find themselves in a financially difficult position, one suggestion would be to use it as a collateral for a short-term loan. But, using it prematurely must only occur when there is no other option,” he said.

Mr. Blagrove points out that another option to consider is speaking to a financial advisor before taking cash from the policy so as to get guidance.

“The policyholder should contact their insurance advisor who can advise them as to how they can proceed as policies have different features. Persons may ask if they can repay what was taken when their financial situation changes. So, a needs assessment is always advisable before making a decision,” he explained.

Mr Blagrove also explained that insurance policies offer advantages when they are allowed to grow especially over the long-term.

“In general, the longer you allow the cash-value of the policy to grow, the more advantageous it is. When you purchase a policy, it is ideal to wait between five and 15 years before taking funds from that policy. Also, if you have a term life insurance policy with an investment option that goes up to 30 years, you can always encash the funds after that time or have it rolled over to another policy for even greater returns. People may be sceptical of this view because there is the perception that only the insurance company will benefit. But, the advantages of waiting and weathering this storm will be rewarding,” he stated.