Posts on Financial and Insurance Topics

Life insurance is one of the oldest financial products on the market but the least understood because of misleading information. Generally, most people associate the product with death instead of life. Yet, a well-structured life insurance policy can be valuable in both situations and even more so during life. In this article, I intend to highlight some of the product's qualities and ways you can benefit by having a policy. Life Insurance is for You When you understand the value of life insurance, it does not matter whether you have children or dependents who rely on you for financial support. Life insurance is for you, not for someone else. Think of it this way: If you believe your life has value, you should purchase a policy to cover the loss of your life. The coverage you get will depend on your age, health condition, and financial resources. Also, if you can afford to buy more than one policy, do so. I know of families who have many life insurance contracts. The couples have their coverages, and all the children, starting at age one, also have individual policies. Granted, not all families can afford the premiums on many policies simultaneously. But the whole thing makes sense when attempting to quantify the value of things around us. For instance, we habitually buy auto, mortgage, and other insurance policies for general protection but often ignore coverage for what matters most—our lives. You are the most precious commodity when determining the value of things in the world. Your value is not in the things you possess but your life itself. To say it another way, without you, nothing else matters. Coming to terms with this understanding, getting an insurance policy to cover the risks you face each day (accidents, critical illness, and death) should be priceless. At the very least, it should be one of your top priorities. Protection for Life and Death But there is more to life insurance than just death coverage. Although that’s a given aspect of life insurance, a good policy will give its owner a lifetime of financial benefits. For instance, while a term policy will cover an individual for a specific period, such as 5 or 10 years, and ends, a whole life policy is designed for lifetime protection, hence the term "whole life" insurance. During that time, the owner can utilize many policy functions for financial improvements. Below is a list of common uses associated with whole life insurance that most people either overlook or underutilize: Savings through premium payments Principal protection during dire economic conditions Financial growth through annual dividends Tax-deferred growth Tax-free loans Tax-free income streams Tax-free death benefits Living benefits during major illnesses One of my favorites is the opportunity to grow wealth through the cash value option within the policy. As the policy owner, you would have management control to decide when and how to use funds to improve your economic conditions. And may I remind you, apart from the death benefit being passed down to your beneficiary, all these options will be accessible to you while you’re alive. An Opportunity to Build a Fortune When building wealth, growth and safety are two enticing qualities for people with money or those who want to grow wealth, and no one understands that better than financial leaders. Life insurance provides both. For this reason, Bank of America, Wells Fargo Bank, JPMorgan Chase, and U.S. Bank, to name a few, and many large corporations have stashed tens of billions of dollars in life insurance holdings. BOLI (bank-owned life insurance) and COLI (corporate-owned life insurance) increase liquidity and grow wealth for these companies in a tax-free environment. These same financial options are being used to fund employee benefits and compensation plans. Like the wealthy, you too can explore the benefits of a whole life policy. In addition to having access to the stable death benefit, you can tap into the CASH reserve whenever you need money for something. For example, consider some of the following actual, life-saving scenarios: JCPenney After the stock market crash in 1929, James Cash Penney was severely affected emotionally and financially. Fortunately, he had a life insurance policy with a substantial cash reserve. Refusing to let his retail operation fail, he dipped into the policy's cash value as a recovery option. Without that money, JCPenney wouldn't be around today. Disneyland Walt Disney had a dream, but not everyone believed in it. He wanted to turn his ideas into an amusement park for family entertainment. At the time, however, most amusement parks were run-down attractions. They were shady and dirty, hardly a place to take children for healthy recreation. When Walt approached his financiers to help create something better, they rejected his request based on what seemed impractical and doomed to failure. As a savvy individual, Walt was known for his business and financial dealings and had been stockpiling money in a whole life insurance policy. Since banks and other venture capitalists refused to fund his operation, he borrowed the funds against the cash value of his insurance policy. In 1955, Disneyland opened its doors for the first time. One year later, 3.5 million people visited the park; I'm sure you've been there at least once. McDonald's McDonald's was another company that relied heavily on life insurance to survive hard times. Ray Kroc was one of three partners who envisioned a nationwide franchise and wanted to expand the company. After six years of business, Ray bought the company from the McDonald brothers and became the sole owner. For the first eight years, Ray didn't take a salary and used his life insurance cash value to pay overhead – employee salaries, a nationwide campaign, and unplanned expenses. Today, McDonald's is known worldwide, serving millions of people every day. However, much of the company's success can be traced back to Ray's life insurance policy. Forster Farms In 1939, a young couple named Max and Verda borrowed against their life insurance policy to invest in an 80-acre farm in California to raise turkeys and chickens. Today, Foster Farms employs thousands of people and sells products worldwide. It is possible that the company wouldn’t be around today without its owner's life insurance policy. Stanford University After Leland and Jane Stanford lost their son to typhoid fever, they invested their wealth and effort to prevent other families from experiencing the same tragedy. In 1891, 555 people enrolled at Stanford University. However, Leland's passing in 1893 brought additional financial strain on the university. Not wanting to give up her dream, Jane used her husband's life insurance proceeds to keep the university running. The financial ordeal lasted six years, but Stanford University survived despite the significant setback. These are only a few examples of countless situations where people have used their life insurance policies to care for business or personal needs. I hope you noticed that some of these individuals didn't have to wait until death occurred to take advantage of their policies' benefits. The money was there when they needed it. Notice also that premium payments didn't simply evaporate, as in other types of insurance, but part of the money was saved and grew larger with each passing year, thus providing access to funds in times of need. Do You Need Life Insurance? What do you think? Is life insurance a necessary evil or a way to financial freedom? From where I'm sitting, there is nothing better in the financial world than a whole life insurance policy. If for nothing else, you can use it to accumulate wealth, which is desperately lacking among most Americans. Today, one of the most requested types of whole life insurance in the United States is Final expense coverage. And while I and many of my fellow agents relish the opportunity to provide the policy to those who need it, I can't help but think about a few circumstances surrounding the issue: Some people cannot get the policy because of hospitalized or hospice conditions. Insurance companies will not cover you when you're sick and ready to die. They want more coverage than offered, but their age or health will not permit it. The premium is higher than expected because they waited too long to apply for the policy. Most regrettably, people who made much money during their productive lives desperately need cash to cover final expenses (debt payment, funeral costs, and other needs). Getting a whole life policy early will minimize your financial worries now and later in life. Again, besides the death benefit, you can use the cash reserve for anything. Here are some examples: Purchasing a home (depending on the amount) Purchasing a car Sending children to college Using funds for emergency Taking a vacation You can do none of these things with funds invested in the equity market, such as a 401(k) plan, an IRA account, mutual funds, etc., without restrictions or penalties. Additionally, you are instantly protected by the policy's death benefit, which is unavailable in other savings or investment programs. In summary, life insurance is an indispensable financial tool. First and foremost, it is designed for self-protection. But in addition to the dependable death benefit, you can utilize the product to fund various personal undertakings, including business ventures, without penalties or tax consequences. All these are possible while the policy grows in a safe financial environment. I recommend purchasing a policy if you don’t have one. The sooner you do so, the more financially secure you will feel. If you need additional information on this topic, please don't hesitate to get in touch with us. Thanks for reading.