4 things to know when using your life insurance payout as an investment

Published on June 17th, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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1. Speak to a financial advisor

Being a beneficiary means that you will receive the payout from a life insurance policy. It also means that you will receive a wide range of opinions on what to do with the lump sum amount from friends and family members. However, for peace of mind you may want to consider speaking to a financial advisor.

According to research by Roy Morgan, 1.96 million Australians spoke to a financial advisor to help them manage their funds. Speaking to a financial advisor can help you make a sound decision when it comes to using the payout as an investment.

2. Eliminate debt to achieve your goal for financial freedom

When taking out a life insurance policy it is important that you choose a policy that will adequately cover expenses that your loved ones will face when you are no longer around. Once your loved ones have received the payout, they can use it to pay off debt which can help bring them one step closer to achieving financial freedom.

3. Using the payout to invest

You may be considering using the payout for an investment to ensure that your loved ones have financial security. Making the right investment is important. Whether you are planning to invest it into the stock market, a business, or a bank account it is vital that you speak to a financial advisor. Weigh your options and see which will bring you the best results. Researching will become your best friend.

4. Important questions to ask

With a lump sum payout comes great responsibility. This means that there will be important questions that you need to ask yourself, especially when it comes to using the payout as an investment. Questions you can ask yourself are:

  • What would you like to invest in?
  • How long will the investment period be?
  • Are there any risks that come with it?
  • What are the costs involved?
  • Will you be able to access funds quickly?
  • How much will you be getting in return?
  • Are there any tax implications that come with your investment and will you be able to afford it?

Although life insurance payouts are not taxable it is important to note that if you are planning on investing the payout it could be taxable. Remember to speak to your beneficiaries in terms of what you would like them to do with your life insurance payout.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Savvy is partnered with Compare Club Australia Pty Ltd (AFS representative number 001279036) of Alternative Media Pty Ltd (AFS License number 486326) to provide readers with a variety of life insurance policies to compare. Savvy earns a commission from Compare Club each time a customer buys a life insurance policy via our website. We don’t arrange for products to be purchased from these brands directly, as all purchases are conducted via Compare Club.

Savvy does not compare all life insurance policies or providers currently operating in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy.

For any further information on the variety of insurers compared by Compare Club or how their business works, you can read their Financial Services Guide.

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