A private family bank consists of multiple whole life insurance policies with cash value. The cash value of these policies can be used for anything that benefits the family, like real estate investments, education, retirement and long-term care, and transferring generational wealth. Private family banks have been used by wealthy families like the Rockefellers to safely fund investment opportunities and ensure a legacy.
The family banking concept is the idea that families can borrow from their own cash reserves in whole life insurance policies to privately fund life’s expenses. By borrowing against the death benefit of an insurance policy, family banking allows you to fund large purchases, like homes, cars, tuition, vacations, and more, while still earning interest on the full cash value of your policy. Family banking allows you to keep more of your hard-earned wealth, often with additional tax advantages, and efficiently pass on wealth for generations.
Keyman or key person insurance policies help protect the policyholder’s business by insuring key employees whose death would inflict a significant hardship on the business. The premiums for keyman insurance are paid for by the business and the cash value of the policy is available for business use. The policy coverage functions as a business asset.
The cost of additional policies depends on who they are for. Policies on children are typically less expensive than your own.
Adding an additional life insurance policy on yourself or someone else involves many of the same underwriting steps as your original policy. The exception is opening a policy for a child. You are responsible for the premiums of all policies you own, even if they are for other people.
In order to take out a life insurance policy on another individual, they have to be an insurable interest. If the policyholder would be financially affected by another individual’s death, that person is typically considered an insurable interest. Examples may include a spouse, parent, or business partner. Insurance policies may also be taken out on children.