Using Life Insurance For Income Replacement:
You Probably Didn't Know?
Few things get me more excited than when I get to explain how to use life insurance as a tool for income replacement.
These type of policies are Permanent/Whole life policies; they provide options for wealth building, protection of assets for loved ones and income replacement if needed.
But people say these policies are a bad idea!….
These policies use to have negative reviews, but they have come a long way. Let me help you see how this may be the best option for your situation.
5 Reasons How Permanent/Whole Life Insurance Can Help You
1. Offers a death benefit
To start out simple; yes! These policies are used for their death benefit. When you die, a TAX-FREE payment is made to your beneficiary.
This can help cover costs of a mortgage, college, estate taxes and used for generational wealth building.
2. Guaranteed growth of your money every year; despite the market. Better than your savings account!
If you are one of those folks that fears the ups and downs of the stock market- this may be a good tool for you. Using life insurance for income growth is GUARANTEED! Now, it may not grow as quickly as money invested in the market, BUT, you can never fear “losing it all.”
It’s best to diversify…and these policies are a good tool for that.
On average, your growth is 2-4% a year.
Maybe you want to protect your family and invest but are afraid of the market CRASHING.
This may be the product for you!
3. Dividends offered by your life insurance company
Although not guaranteed; dividends, or a sum of money paid out regularly to its policy holders, are paid as a benefit of the companies profits. These dividends are typically paid out quarterly.
Not something to relay on completely, but a nice benefit.
and…these dividends are NOT TAXABLE!
Understand that all the life insurance companies we do business with have been around for decades, some even 100 years. They know how to run their business. They offer up this as a bonus to do business with them- so you can share in the prize of their profits.
4. Income replacement; while you are still alive
You have an option to take out money from these policies to use for ANYTHING.
Let me explain.
Permanent life policies do not have term limits like “Term Life” policies.
You start paying your premiums, those funds get invested by your life insurance company and if during the policy you suddenly have a need for extra income… you can borrow from the policy at anytime- tax free!
IRAs/Roths, mutual funds, they don’t offer you this “TAX FREE” option but a permanent/Whole life policy DOES!.
There are NO restrictions on the use of this money, you can use it to;
- Cover medical costs
- Pay off debt
- Travel, maybe you have a terminal cancer and want to travel while you can
- Use the money to invest in another venture
- Pay for education or college
- Finance major purchases
the list goes on, anything you need.
This is possible because the policy continues. The money you take out does go against the policies max payout, but even withdrawing money early-still offers the death benefit option after you die.
Here is an example of how this often works;
Jon is a 61 year old attorney. He was just diagnosed with stage 3 lung cancer and has medical bills to cover but also wants to take a trip to Europe with his children and grandchildren before he starts chemo.
He borrows from his permanent life insurance policy that he bought at age 44 y/o. He borrows 32K (tax-free) and is able to cover those things he wants.
At his death, his 5 million dollar death benefit is paid to his wife as his beneficiary minus the 32K he borrowed from.
5. Premiums stay the same- forever!
Often times Term Life comes across as the “better deal.” Of course it’s often more affordable than a permanent life policy and if young and healthy- super easy to get coverage.
One thing you may not have considered; maybe you get a life insurance policy when you are young and healthy. What if you go to get a longer term policy and now you have medical issues such as diabetes, hypertension or cancer- those affordable premiums you have…are now much higher with a new policy.
If you invest in a permanent life policy at the start, or even convert your Term policy to a Permanent/whole policy- it’s forever. Your premiums never go up.
You may pay more in the beginning but the trade off is peace of mind that you are covered till the end. In other words, if you suddenly have a serious health conditions, you always have coverage and protection.
People assume they will be healthy and able to buy a new term policy when it ends….Don’t bet on it! Life happens…chronic illness, cancer. A permanent life policy stays the same forever. That’s assurance that your family and wealth will always be protected.
Important Take Aways
- A Permanent/Whole Life Policy shouldn’t be written off because you may have heard some negative reviews. It is a valuable tool for wealth building, financial protection and has more options than term life plans.
ALSO CONSIDER THIS…
- If you suddenly cannot afford a life insurance policy and have a TERM policy… you are done. Your policy will lapse if you don’t pay the premium on time. In contrast, with a permanent life policy you can often borrow from it to pay the premiums until you can stabilize your finances. Again, a TERM policy if not paid…is gone!
Let's make sure you have income if needed!
“Greg was so knowledgeable and easy to talk to- I called and spoke directly to a real person! It saved me tons of research time.”
” I have a whole life policy that Greg helped me with. Over the years have had questions…I pick up the phone or send an email and I get a response right away! You don’t always get that with big companies. I love the personal touch. Thanks Greg!”
– Amber S.