There are several options for ensuring your family’s financial security. You could, for example, set up a 529 college savings plan, purchase real estate, or create a trust. However, whole life insurance might be the best option if your objective is to amass wealth and leave your loved ones with a sizeable legacy. It allows you to receive dividends and earn interest on your savings.
What Is Whole Life Insurance?
The death benefit of a whole life insurance policy is permanent and covers the policyholder for their entire life. Your insurance company contributes a portion of the monthly premium paid by the policyholder to a cash savings account. The savings account accumulates funds over time through interest.
Types of Whole Life Insurance Policy and how they Could Amass Wealth
Different types of life insurance can be used as assets, and each has its advantages. Here are some examples of whole life insurance policies and how they can help you build wealth over time.
- Whole life insurance: When the policyholder passes away, the insurance company will pay the beneficiary a lump sum if the premium payments are made on time. Furthermore, premiums are applied to the policy’s cash value savings account, which typically grows by 1% to 2% per year. Therefore, buying a whole life insurance policy earlier in life allows your savings to soar. Whole life insurance funds are not taxed until the policy pays out in cash.
- Universal life insurance: These plans include cash savings accounts like whole life insurance. Universal life policyholders, on the other hand, may be able to change their death benefit. Also, it could lower monthly premiums if their cash value account reaches a certain level.
- Guaranteed issue of life insurance: Most life insurance policies require medical exams and reserve the right to deny coverage to some customers due to health issues or way of life. On the other hand, everyone who applies for guaranteed issue life insurance is accepted. A disadvantage is the small death benefit. The typical payout for these plans is $20,000, with a $20,000 maximum. Furthermore, not all policies accrue monetary value; the funds may only be available as a loan even when they do.
Is Life Insurance a Good Investment?
In terms of return on investment, life insurance is the least profitable asset. For example, an employer-sponsored 401(k) typically grows at a rate of 5% to 8% per year. At the same time, an individual retirement account (IRA) is expected to return 7% to 10% per year. However, your potential growth with life insurance is only 2%. As a result, before considering alternative investment options, it is best to contribute the maximum amount allowed to your IRA or 401(k)
You might want to think about getting life insurance if you’ve already contributed the maximum to your retirement account but still have extra cash. Although it is not technically an investment, it can be a prudent financial decision. Whole life insurance can be valuable to your financial strategy because it provides a cash value account that grows tax-deferred. Furthermore, the death benefit protects your beneficiaries, allowing you to care for your children or other heirs even if you run out of money in retirement.
How to Determine the Cash Value of Your Whole Life Policy
Almost any financial need can be satisfied using the cash value of your whole life insurance policy. You could, for example, withdraw enough money to cover three to six months of living expenses and start an emergency fund. You could also use the savings account to pay for all or part of your life insurance premiums, invest in other assets, or do both.
It’s also a good idea to consider the drawbacks of using the cash value of your entire life insurance policy. The government will almost certainly tax the withdrawal as income that year. Furthermore, making large withdrawals may reduce your death benefit. Using your cash value to pay premiums over time may not be sufficient, putting your coverage at risk of expiration due to late payments. Suppose you plan to spend the cash value in your policy. In that case, you should regularly check your account to ensure that your premium is paid and that your death benefit is unaffected.
Contact Information:
Email: [email protected]
Phone: 8668727470
Bio:
Mark Zimmerman, Sr currently is the Managing Member of Aurifex Financial Group, LLC. Aurifex Financials mission is to help clients realize their vision of living life on their own terms by providing credit repair, financial counseling, insurance solutions and money lending services. This is accomplished by using a holistic approach. After hanging up his uniform after 22 years’ service in the military, Mark still had a desire to help others and so he created Aurifex Financial.
As part of Accredited Financial Counselor (AFC) credentials, Mark had to obtain and document over 1000 hours helping others which was accomplished by helping hundreds through a local non-profit. As an independent Insurance Agency, Mark is licensed in property and casualty, home, business, health, Medicare, life and annuity products.
