With low interest rates on government bonds, some financial advisors are encouraging their clients to buy permanent life insurance as an investment vehicle.

There are multiple points to support this advice: first, the rate of return on permanent life insurance is 3-5 percent; second, all funds will ultimately pass to a beneficiary free of income tax; third, the policyholders can borrow against their policy without incurring any taxes. Any loans that don’t get repaid will simply be deducted from the death benefit.

Now for the cons of this investment strategy: naysayers point to the hidden administrative fees contained within any insurance purchase, the limits on gains accrued, and the uncomfortable realilty that gains diminish the longer you live.

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