For many individuals unfamiliar with how life insurance works, understanding it as an asset can come as a surprise. Key attributes of Life Insurance include, liquidity, tax-free growth, market protection, and guaranteed growth – those living benefits are in addition to a policy also providing a death benefit. But what specifically makes life insurance an asset?
Properly structured Permanent Whole Life Insurance is an asset because it helps other performing assets grow, making it an “and” asset.
When an individual decides to purchase a properly structured whole life policy, with a high cash value, they are able to use their cash value to safely invest in other performing assets without losing any opportunity cost.
Instead of placing money directly into investment vehicles, first place your money into a whole life policy, and use the cash value to invest. Your dollars, placed directly into investments, go to work for you just once. However, a whole life policy allows you to invest in other income streams; while still earning interest on the original amount of your policy.
This strategy makes owning and investing with cash value life insurance an “and” asset because it helps to build long term wealth. Cash value life insurance puts your money in motion, maximizing its use and earning potential.
Liquidity and Cash Value
The Cash Value from your life insurance policy is accessed in the form of a policy loan. Borrowing from the insurance company with a policy loan has sincere advantages.
First, as the borrower, you create the borrowing terms. Because your death benefit acts as collateral for the loan, the insurance company does not demand a repayment schedule. However, if a person has used their entire cash value, and are not repaying, it will take some time for the policy to build cash value again.
Removing the Bank
Whole Life Insurance creates opportunity to build lasting wealth. Used as an asset, it can help support the investment of other performing assets (anything that puts money back into your pocket). Instead of using a bank, credit card, or even hard money to invest; borrow from yourself while still earning interest with the same dollar. This system allows for anyone to remove the bank from their financial equation.
“Creating wealth is not a mystery, it’s a formula.”