For many, life insurance is not at the top of their list, but there are some beneficial factors to think about before completely crossing it off. Now you may ask, can life insurance make me rich? Before thinking about getting rich off life insurance, consider your financial goals. Life insurance can be used as an asset to help your future.
How Whole Life Insurance Works
Let’s break down the different types of life insurance, specifically Whole vs. Term Life Insurance. Whole life insurance is permanent life insurance that offers protection for the entirety of your lifetime if premium payments are kept current. Term Life Insurance is just as it sounds, it’s coverage for a specific term meaning after that term is over, your premium may increase, or your coverage ends.
Using Whole Life Insurance to Build Wealth
Having a Whole Life Insurance policy, or a permanent life insurance policy, can help your beneficiaries receive a higher payout without having to pay estate taxes on the insurance premiums.1 Building wealth with your whole life insurance policy can benefit the family or the policyholder. For the family, a whole life policy death benefit can create wealth for the next generation. For the policyholder, it can build a cash value over time and can earn a guaranteed fixed interest, so it always grows. This would be considered a conservative way for the policyholder to build wealth.
Cash Value Accumulation
With a life insurance policy, there are two components to keep in mind. The main purpose of your policy is to provide a death benefit for your beneficiaries or retirement funding. But with whole life insurance, or permanent life insurance, there is also a cash value component which can build an acquired value and can essentially allow the policyholder to borrow against the policy if they choose. Cashing in a whole life insurance policy is an option, but before you take out a loan or withdrawing from your policy, keep in mind you can encounter hurtles such as fees or penalties, certain age requirements, policy withdrawal rule and the value of your policy. Typically, your whole life insurance policy will have an accumulated value – which is why you can make money with life insurance. Each policy is different, so we recommend reaching out to your agent to determine what this process may look like.
Borrowing Against Your Life Insurance Policy
Borrowing against your life insurance is a big decision that should be discussed with not only your family but also your agent. Speaking with your agent can better help you understand what the pros and cons are of doing so. It can also help determine how this can affect your life insurance wealth building plan. You can save for retirement and build up your retirement income while preparing for the unexpected. There are policyholders that have borrowed from their life insurance like Walt Disney did in 1954 when no banker would lend him the money to start his theme park.
Building your wealth with a life insurance policy is possible but you should be aware of market volatility. Interest rates can change and it’s hard to predict the rate of return on your investments. This, however, shouldn’t stop you from investing in the future. Protecting your retirement savings from a downturn should be on the top of your list whenever you are ready to start making money moves. If you are looking to having more say in how your interest is earned and having flexibility with taking out a loan or withdrawing from your policy, an indexed universal life insurance policy may be a good option to look into.
Tax-Free Death Benefit
Increasing your wealth with life insurance to leave a bigger sum for your beneficiaries and have financial security is possible. Generally, the death benefit that is given to your chosen beneficiaries may be tax-free leaving a larger sum. Life insurance can help put your worries at ease if you’re wanting your mortgage to be taken care of or for your kids to have the necessary funds for college. Creating a plan and setting the necessary foundation for your children to be successful financially when you are no longer around allows them the ability to build generational wealth.
To find the right coverage for you or learn more about your current policy, contact your local Farm Bureau agent today to get started.
1. Neither the Company nor its agents or advisors give tax, accounting or legal advice. Consult your professional advisor in these areas.