When the average person thinks about purchasing life insurance the goal in mind is generally to protect his or her loved ones in the event of that person’s death. That protection can be as extensive as making sure that costs like the mortgage, children’s education and general living expenses will be taken care after they’re gone. Likewise, it could be as simple as covering the costs of one’s funeral expenses. The goal might be different from person to person, but the underlining theme is pretty much the same: most people believe that their life insurance policy will benefit their survivors.
The policy owner will have peace of mind, but not receive any direct financial benefit. However, there can be a number of “living benefits” for the policy owner with certain life insurance policies. First let’s take a look at the two types of life insurance: term and permanent. Term insurance provides coverage for a specific period of time. These periods of coverage can span up to 30 years of “level” coverage, which means that the premium payment will remain the same during that specified time. After that level period ends, the insurance will probably cost too much to keep in force. Permanent insurance is meant to stay in force for the entire life of the insured. Both types of insurance will pay a death benefit, but it is the permanent life insurance that has the ability to offer the owner so many more additional benefits if it is structured correctly.
Unfortunately, over the years, many people have been led to believe that buying term insurance and “investing the difference” is in their best interest. Several financial “entertainers” have led many to believe that Whole Life Insurance is an overpriced way to buy life insurance. Even life insurance agents sometimes will not, for whatever reason, explore all the benefits of whole life insurance with potential clients. This lack of information has led many to believe that life insurance is little more than a necessary expense as opposed to an investment in themselves. There are a number of permanent life insurance products that are available today. The one I am referencing here is permanent, participating whole life. Participating insurance pays a dividend to the policy owner.
This insurance policy will work best if taken out with a mutual company. Mutual companies are not publicly traded entities; instead the company is owned by the policy holders. It is interesting to note that while the dividend mentioned earlier is not guaranteed, many mutual companies have been paying dividends every year to their policy holders for over one hundred years, even during The Great Depression. These dividends, along with the premium payments, will help to increase not only the death benefit, but the cash value in the policy as well. Also, by using a “Paid Up Additions Rider”, the policy owner can increase the amount of money put into the policy. This will create a compounding effect on the death benefit and the cash value which will multiply the dividend benefit paid by the mutual insurance company.
So what are some of the “living benefits” available to the policy holder with this type of insurance? A partial list would include:
-Guaranteed cash accumulation
-Liquidity and control of your money
-Access to credit Reduced interest paid to others
-Insurance for life
-Creditor proof in certain states
-No government involvement, unlike 401k plans
Let’s take access to credit as an example here. When purchasing a car most people will probably finance some part of that purchase from either the auto dealership itself or perhaps their favored lending institution. In that case you would be paying interest on your purchase as well as the balance of the principal to someone else. You might have the money in a savings account and think that you could save on the financing charges by paying cash for the purchase and in that regard you would be correct, but you would be losing the interest you would have attained if you had kept the money in your account. Treating your whole life insurance policy as your own personal bank, you could take a policy loan from the cash value, set up the terms of repayment on your own basis and recapture the principal you had put into the vehicle purchase.
Additionally, your policy would continue to receive dividends. Of course, you could use the cash value built up in time to finance whatever you wish, including a child’s college education. An even better strategy would be to purchase this type of whole life policy for a child when they were very young, which if properly designed could not only help to fund a college education, but serve as a financial vehicle for the entire life of the child and even provide an income for that child in retirement. The death benefit then creates a tax free legacy for the next generation.
Unfortunately, it would be impossible in an article of this length to fully discuss the benefits and structure of this type of policy. If this subject has lit a spark of interest, I would strongly recommend you read “A Path To Financial Peace of Mind” by Dwayne Burnell. If you would rather learn more without reading an entire book on the subject, you can watch several videos, each about five minutes or so in length at: www.infinitebanking.org. Beyond that material, you will need someone to help you put this information together for you so that you can use it in your life.