Does Life Insurance Work As An Investment? 
Yes in many ways . The most common method for using life insurance as an investment is through Indexed Universal Life policies . 1 . You are looking for an alternative to CD or Money Market accounts with historically low rates of return . 2 . You want better growth than those accounts , let ` s say 4-6 % on average net of any fees . 3 . You want that growth to be on tax-deferred basis . 4 . You want our money to be totally safe from market losses . For example , if you purchase a mutual fund at $ 100,000 , and it grows 10 % in the first year , your account would reach approximately $ 110,000 . However , if the following year nets you a 40 % loss , your account would only be at $ 66,000 . If your third year produced a 10 % rate of return , youd still be below your original investment at $ 72,600 minus fees and expenses . However , in an Indexed IUL the reset every year means you never earn less than zero . So , if you put $ 100,000 in a single premium Indexed IUL and receive 10 % growth your first year , your end result is $ 110,000 . Continuing the hypothetical scenario , say the markets drops 40 % in the second year . Youll lose nothing . After your second year , your account will still be at $ 110,000 . In the third year , your account grows 10 % , which means youll have $ 121,000 minus fees and expenses . So what you get is a potential for upside of the market with no downside risk . Generally the floor is 0 % and the cap is 15 % . That means that if the S&P index gains 10 % for a year your will get 10 % into your contract minus fees . If the index moves 20 % you will only get 15 % . This is the cap that means that you can not get credited more than that . But if the index loses 10 % you will not lose anything . Your contract will get 0 % for that year minus policy fees . In a properly structured policy fees are usually around 2 % . Historically , in properly structured IUL policies cash values grow on average 7-8 % annually . If you deduct around 2 % for policy fees you may net 5-6 % annually . Again , all of your money is liquid from day one , principle and interest . It grows tax-deferred and there is no market risk , but there is a chance for a market gain up to 13-15 % annually minus fees . Also , since it is a life insurance policy you will get other benefits . A fairly healthy 65 year old would get over $ 200,000 of tax free death benefit with a $ 100,000 single premium payment . Many of these policies have additional benefits like Terminal Illness rider and Chronic Illness rider included . These are called Living Benefits , which allow you to use a bigger portion of the death benefit when you get terminally or chronically sick . 