Life insurance can be about much more than just providing for your family if you pass on. Of course, it can give you and your family peace of mind that they will be taken care of if the worst happens. What you may not know, however, is that certain types of life insurance can also be a vehicle for building wealth in the long run. Here is some more information on the various types of life insurance that you can buy.
Traditional Whole Life Insurance
A traditional whole life insurance policy offers you a guaranteed death benefit along with a savings component that helps you build wealth. In a nutshell, you make your policy payment every year, and the company pays you dividends over time that get credited to your cash value. This becomes a type of bank account for you to draw from as you need money. You also get lifetime coverage for this type of policy in a guaranteed contract.
This policy is good for your entire life. A whole life insurance policy will not lapse, nor will you need to renew or get a new policy. The insurance company invests your premiums, and this is where the growth of your cash value happens. While you do not direct the investments, the insurance company will pay you based on how the insurance company performs in its investments and overall finances. This is why we only recommend using about 10 Insurance companies across the US.
If there is any drawback to a traditional whole life policy, it is that it will be more “expensive” than a term insurance policy. Remember though, everything with the Insurance Carriers is cost vs risk. They are 100% obligated to pay your death benefit and build your cash value every single year. Moreover, with a whole life insurance policy, your premiums will be constant and not change over time and your cash value is guaranteed to increase every year. You will absolutely get more out of it than you put in if you keep it for your Whole Life.
Term Life Insurance
This is one of the most common life insurance policy types that people associate with insurance. If you are trying to contextualize what term life insurance is like, think of it as renting a home instead of buying one. You will still have the benefit of having protection, but you are not necessarily building up any equity.
A term life insurance policy is one that you have for a set period of time until the policy expires. Usually, you can buy term policies that last from 10-30 years. You will receive a price at the beginning of the policy, and this will be the fixed premium that you pay until the policy term ends
One of the benefits of a term life insurance policy is that the premiums tend to be lower. However, along with the lower premiums comes the fact that you are not building up cash value after you make your payments. While term life insurance will pay the full death benefit if anything happens to you, once the policy term ends, you also have nothing to show for it.
One important lesson we teach our clients is that there are no deals with the insurance company. They base their products on a cost vs risk scale. This simply means that term insurance is “cheap” because there is 99% they won’t have to pay a death benefit claim during that term period. We don’t discourage anyone from buying term insurance, but we do believe in educating them on how it really works. Start by asking yourself the right questions based on what your financial goals are!
Universal Life / Variable Life and Indexed Universal Life
Insurance
It is easy to see why individuals would want to utilize their whole life insurance policies as financial tools that drastically improve their flow of money. Infinite banking allows you to borrow against the Cash Value that builds up inside your Whole Life policy and use Other People’s Money to finance the things in your life so your money is always growing at a compounded rate. This is one of the fundamental principles of the money game. Never interrupt the compounding of your capital.
Where Americans have been taught to save their money are some of the least effective places. Other than keeping your money liquid they serve very little real purpose other than helping someone else get very wealthy. By simply changing where you save you will be empowered by seeing your wealth grow each year.
Ultimately, the process of becoming your own banker is about learning how money really works. Banks and Wall-street continually teach middle America that building wealth is complicated and takes 30 years to “win the money game”. Their plan for you is to accumulate money in a speculative environment (where you will most definitely lose money) and then when you’re 59 ½ you can use YOUR money… All the while they get wealthier every single year by using your money.
Reach out to one of our Wealth strategists and see how they can help you implement this process for you, your family, and your business.
Why Banks Buy Whole Life Insurance
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