As a Wealth Strategist, one of the interactions I enjoy most is teaching clients how to implement a whole life policy into their everyday life. I savor these teaching sessions because typically, I receive the same excited, shocked, curious and amazed reactions when clients become enlightened to the life changing financial effects of traditional life insurance as an asset.
To be frank, most of my clients will initially give me pushback when we talk about whole life. “It’s too expensive,” is a common spoken phrase. I also hear, “I want___amount of death benefit, and I don’t want to pay more than____amount each month.”
I completely understand the resistance. Before I knew what whole life insurance was—excuse me, how whole life insurance worked—I had the same reservations. However, whole life insurance is completely different than the majority of people understand it to be.
Understanding Why Life Insurance is an Asset
Traditional whole life insurance, also known as Cash Value Insurance, gives a policy owner wealth building opportunities.
The wealth building opportunities happen because money inside of a policy grows tax-deferred (if not tax-free), can be borrowed against tax-deferred (if not tax-free), and still earns a rate of return. In addition to these benefits, whole life insurance from a mutually owned insurance company is safe from stock market volatility.
An individual can borrow against their policy while not risking the loss of capital, which means that the cash value from a life insurance policy can be used to invest in other performing assets. This strategy with whole life insurance makes the product an “and” asset. You don’t have to choose buying a policy or buying a house; you can use the policy and buy the house.
How We Build Our Policies
In short, we build policies backwards. Instead of determining how much you need for a death benefit, we first determine how much you need for living benefits.
For instance, let’s say you want to build an investment portfolio with a passive income goal of $1000 per month. To do this, you decide on purchasing rental properties. Knowing that your wealth building strategy is passive income through rental properties, your agent can appropriately build your policy to allow for flexibility and safety with your money. In addition to the flexibility and safety of your money, you are still earning interest on your policy’s cash value.
Essentially, because you are using Life Insurance as your vehicle, you are not only building wealth through your property investments, but also from your policy.
Once my clients, or anyone for that matter, realizes the flexibility that comes with a whole life insurance policy, their paradigm of money changes. What also changes is their behavior with it. Instead of feeling shackled by the lack of choices that come when money is tied up, individuals who capitalize on money with whole life insurance feel liberated knowing they have more financial options.
For more information on whole life insurance, talk to an agent at Paradigm Life. We pride ourselves on helping people reach financial freedom.