Have you ever heard the expression that “you can’t have your cake and eat it too?” When I was growing up I used to hear this phrase often when I would look to do, or have, too much of something. Today, in our culture, we seem to have an abundance of choices available to us: From what restaurant we want to eat at to what kind of car we drive, the choices are abundant. In the financial world choices also abound. Despite our numerous options, I have found that when choosing where to put our hard-earned money we often fit into the same situation: We can’t have too much of a good thing.
There is one product where this idiom is simply not accurate. With maximum-funded whole life insurance policies (Infinite Banking) we are able to “have our cake and eat it too.” When a whole life insurance contract is appropriately structured, it will provide the policyholder with multiple benefits above and beyond just the life insurance death benefit. One of those amazing benefits is an annual dividend. A dividend is like having our cake and then being able to eat it too.
The mutual insurance companies that we represent have consistently paid a dividend for over one hundred years straight. Yes, you read that correctly. I said over one hundred years straight. In addition to all of the many other benefits associated with these polices, your policy will likely always be growing and compounding. This growth comes from the contractual guarantees of the policy as well as an annual dividend payment. While these dividends are not guaranteed, as we’ve discussed, they are very likely to be paid. Additionally, the IRS considers the dividend a return of the whole life policyholder’s premium. This allows the dividend to remain a tax-free benefit of the policy*.
Additionally, this dividend payment is accessible to the policy owner in several ways. It can be taken from the policy as a withdrawal or it can be applied back into the policy, thus increasing the policy’s total death benefit as well as its cash value year after year.
So the next time you hear that “you can’t have your cake and eat it too,” remember that there are a few things in life that this unfortunate saying does not apply to. If you are interested in setting up a policy where this dividend is now the frosting on the cake that you plan to have and eat then please feel free and reach out to us today!
*We suggest that you consult your tax advisor to discuss the many tax benefits of owning a whole life insurance policy.