Discussing the family bank and whole life insurance isn’t a particularly romantic topic. Most people with life insurance policies name their spouse as the beneficiary and leave it at that. But taking out additional whole life insurance policies on your loved ones might just be the best Valentine’s gift you buy this year.
Saying “I Love You” with Whole Life Insurance
- It’s permanent; it shows lasting commitment to your loved one
- It creates a legacy for future generations of your family (think Rockefellers)
- If offers a path to financial independence (money is a leading cause of divorce)
- It protects loved ones and their wealth with increased cash flow and liquidity
About 40% of people say they would feel more secure if their partner or spouse had greater life insurance coverage. Most of those people also overestimate how much life insurance costs. Why not purchase an additional policy for your spouse to provide peace of mind for both of you?
In addition to increased security, when both you and your spouse own dividend-paying whole life insurance policies from a mutual insurance company, you increase the power of your family bank. The family banking concept offers three main benefits.
Benefits of a Family Bank
- Your whole life insurance policies collectively earn more cash value and keep more of your family’s wealth out of the hands of the IRS.
- Anyone in the family who owns a policy can borrow against its cash value while continuing to earn interest on the policy amount; this is a great way to teach children about wealth strategy.
- A family trust can be set up and designated as the beneficiary for your collective policies, passing down tax-free wealth for generations.
Who Can I Buy Life Insurance For?
- Significant Other
- Business Partners
In all cases, aside from life insurance policies for children who are minors, insuring someone else requires consent and and establishing insurable interest.
Consent: You cannot take out life insurance on other adults without their permission.
Insurable Interest: The person you’re insuring affects you financially, and you would be negatively affected if that person were to pass away.
Buying cash value life insurance policies for other people, particularly your children, is typically easier than setting up your own policy. For more information on whole life insurance for children, issue #3 of The Donohoe Bulletin is a great read.
This February, show your loved ones you care about their financial well being and schedule a free consultation with a Wealth Strategist to learn more about the benefits of dividend-paying whole life insurance to fund your family bank. We work with a variety of providers to tailor policies to your unique family dynamic and financial goals.