Many forms of life insurance that people purchase today are called cash value life insurance policies. These policies combine life insurance with investments. They are often called whole life or universal life insurance. Many professional financial advisors recommend that their clients don't invest in these types of life insurance policies.
They say that the returns are not good when compared to other investments. Insurance companies will tell you otherwise and some insurance sales people can be quite persistent and persuasive. The key here is to not make a rash investment decision. Be sure to read all the fine print on these investments to make sure that you get the most return possible for your money.
Regardless of the interest rate, some of the issues with cash value or whole life insurance cited by financial advisors include:
If you want to get some of "your" cash out of the policy, sometimes this is considered a loan against the policy. Interest on this loan can be much higher than your return, causing you to lose money.
Sometimes there is interest for the first 3 years. This really can hurt your investment over time, to not have any interest at the start. Be sure to read about your policy and when you start gaining interest.
You generally only get the death benefit or the cash benefit, not both.
The insurer can often choose to hold your money for some period of time after you request it. It could be up to 6 months for you to get your money
Again, the key thing to keep in mind is that old saying "if something seems too good to be true, it probably is". So read the fine print on the policy and get some advice before you rush into buying cash or whole life insurance.
Note: always consult your professional financial advisor. The advice on this page is just opinion and you should consult a professional before making any financial decisions.