Life Insurance - Your own Personal Bank
Life insurance is obviously the best way to protect your family should you pass away. While term insurance is a good way to cover a large loss with a higher death benefit, did you know permanent life insurance can actually act like your own “personal bank”?
How is that possible? Well, with permanent life insurance you are building cash value inside of the policy. The cash value that accumulates is like a personal bank account.
You have the ability to draw against this cash value, as if you are your own personal loan officer. Like a conventional loan there will be interest to pay. Think of the death benefit as the “collateral” for your policy loan. Should you pass away, the death benefit will be reduced by the amount you loaned from the cash value.
When it comes to growing the cash internally, different policies will accumulate cash at different rates. The most conservative and slowest is whole life insurance. This type of policy doesn’t offer options in terms of how the cash is invested, however, it does offer a fixed rate of return in the form of an untaxed dividend. The biggest advantage here is that those dividends are treated as a return of premium and are not subject to being taxed.
Policies that will accumulate cash value a little faster are universal and variable universal life insurance plans. Usually in these plans, you’re investing extra excess premiums resulting in the higher return. Of course with higher return comes higher risk.
As you look to your retirement years and consider your investment vehicles for having a strong portfolio, life insurance should be a consideration as an alternate method for growing cash value that can be used as supplemental income. Keep in mind, proceeds of loans against permanent life insurance cash value are non-taxable and they actually remain tax-free even when the loan is not repaid. There are many great options with life insurance for investing in your future.
About the author: Mark Yurkovic has been in the life insurance business for over 12 years, and holds CLTC, LUTCF, and CES designations. He enjoys building remote control boats, and playing instruments including the piano, guitar, banjo, and mandolin. Mark would love to discuss life insurance options and work towards finding the best policy fit for your family. You can contact Mark at 1-800-651-1953 or MYurkovic@Pivot.com.