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What You Need To Know About Permanent Life Insurance

| September 20, 2019

There are several types of life insurance in the market today and there has been many unique contracts issued over the years. I am here to shed some light on how to properly utilize a permanent life insurance contract to improve your financial situation. There are a lot of pundits who believe buying permanent insurance is not a good financial decision. I am here to tell you they are wrong and the wonders/secrets of permanent life insurance are being utilized by some of the wealthiest people in the world. In fact, did you know people like Warren Buffett and Bill Gates are investing in permanent life insurance contracts to save and accumulate for their future? Banks also utilize life insurance to invest their own assets. Most would thinking banking institutions would be the last group to invest their client's money in life insurance. I would agree that permanent life insurance isn't for everyone, but there are many people who would benefit greatly from utilizing the tool. Let's take a look at some of the advantages:

1. Permanent life insurance premiums do not change unless you want them to. Again I will say this with a preface that you bought your product from a reputable agent and company and they sold it properly with an over-funding strategy so there would be adequate premium in the contract in the future. One of the biggest crisis in the financial industry today is the number of permanent life insurance contracts that were underfunded during the 1980's when interest rates were sky high. People were replacing their whole life contracts with universal and variable universal life contracts with the idea that interest rates were never going to go down. WRONG! In fact, interest rates have gone down almost 30 straight years leading a lot of these contracts to be in crisis mode. If the contract is properly funded and reviewed regularly the premiums should never change unless you want them to. Make sure you are reviewing your policy on a consistent basis and funding it properly to avoid this mistake.

2. Permanent insurance will be there the day you die. Death and taxes are the two things certain in life. If you buy term insurance you are betting on the day you will die. In fact, "less than 1 percent of all term life insurance policies ever pay death benefit claims," (Mitchell, 2018) where almost all of the permanent insurance policies issued pay a death benefit because they are designed to be there through your date of death.

3. Permanent insurance grows a cash value. Similar to equity in your home your contract builds and accumulates a cash value. You can use this cash value in a lot of different ways such as skipping a premium payment, taking a loan or withdrawal, or supplementing your retirement income on a tax-free basis. There are so many different ways you can utilize the cash that we don't have enough room in this blog to describe, but just know there is tons of flexibility.

4. Permanent insurance is a great way to efficiently pass assets to the next generation or to charities. Exchanging pennies for dollars is a great financial decision and understanding how to utilize/maximize your wealth can create a legacy far beyond what you may realize.

5. Permanent insurance is a great tool for business owners. Did you know Walt Disney borrowed from his life insurance to help start Disney World? Did you know McDonald's was started with the utilization of cash value inside of a life insurance contract? There are tons of stories of business owners who used their permanent insurance to grow their businesses. There are also ways you can generate tax advantaged benefits for your key employees or owners inside of a life insurance contract. Again, too many to describe here, just know there are lots of ways to use permanent life insurance for business owners.

As you can see permanent life insurance offers lots of advantages to those who decide to purchase it. I am the first to tell you that permanent life insurance isn't for everyone to purchase, but if you work with a reputable agent they can help you design a plan that can really benefit you over the long run. The best part about the plans are the tax advantages that come with them such as tax-deferred growth of the inside build up and the tax-free death benefit that comes with the contract. Take a look at these products as they might just help you reach your financial goals better than you thought they would.

Mitchell, D. (2018). Why Term Life Insurance is Cheaper. Retrieved from