Brightside Financial

USING LIFE INSURANCE TO CREATE INTERGENERATIONAL WEALTH

Have you ever pondered over the enduring prosperity of certain families across generations? What’s the magic ingredient that keeps their wealth flourishing? The answer might just lie in an unexpected place: life insurance. You read that right! Life insurance isn’t just about securing your loved ones’ financial future; it’s a powerful tool for crafting a legacy that lasts several generations.

First, let’s go over the different types of life insurance.

Term life is most affordable type of life insurance coverage. The younger and healthier you are, the lower the cost. The older you get and as health issues arise, the cost goes up. At some point, the cost to maintain term insurance does not make sense economically. Term policies provide a price that is “locked in” for a period of time. But after that, coverage may or may not be renewable, but would be at a higher cost due to attained age. But IF you die while the term insurance is in effect, the ROI (return on investment) is well worth it to the beneficiaries since it is the best way to get the most coverage for the lowest price. But if you don’t die, it’s like renting…you don’t create cash value and the coverage at the price no longer exists after the term has expired.

Then, there are permanent life insurance policies. There are several variations of this type of coverage, but they pretty much fall under 3 categories: Whole Life, IUL (indexed universal life) and VUL (variable universal life). Permanent life insurance is where the magic happens. As long as you keep up the premiums as agreed upon in the contract, permanent policies stay with you till the end. And here’s the kicker – it comes with a cash value feature. Picture this: as you pay those premiums, your policy’s cash value grows, quietly accumulating wealth for you and your family! And, when the inevitable happens, your loved ones receive a tax-free windfall!

Permanent life insurance policies are not a get rich quick scheme. Despite what you see on social media, these policies require a long-term commitment. This isn’t just about securing your retirement; it’s about leaving a legacy that speaks volumes about your foresight and dedication. There is a cost of insurance associated with permanent insurance which is why your stockbroker and Dave Ramsey turn their noses up at this type of product. However, for those who understand compound interest and have patience, the benefits of the tax-free cash value far outweigh these costs.

Have you ever heard of “Be Your Own Bank” or “Infinite Banking”? These are constructs of social media and there is not an actual product with these names. These are permanent policies which have compounded over time and built-up cash value. Most of the cash value (not the death benefit) can be taken as a loan to pay for anything such as an emergency, college, down payment on a house, wedding, anything you can think of…tax free. The “catch” there is you take out a “loan” at a very low rate with no hassle from your insurance company. In fact, they won’t ask you if, when, or how you’ll pay it back or what the money is for. Savvy investors like Walt Disney used their cash value life insurance to fund things like building Disneyland when none of the banks would loan him the money. Investors today use their cash value life insurance to fund business ventures. The amazing thing is, because it’s a “loan”, you are still earning/compounding your money as if all of your money was still in the account.

If you are located in or around Denton, and have questions, we’d love to help. Just schedule a no cost consultation so we can talk about how life insurance can diversify your portfolio and give you peace of mind.

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