Whole Life Insurance Investment Strategies
Whole life insurance was one of the first forms of permanent coverage. Insurance companies offered larger whole life policies to business owners and the wealthy while the debit agents stood outside the factories and went house to house collecting pennies and nickels each week for small face amount whole life policies. Even though the cash value doesn't grow rapidly, as it might in other investments, it is guaranteed and consistent. There aren't the dramatic fluctuations in policy values as there are in market-backed investments, in fact, there aren't any. These make it a perfect vehicle for specific investment strategies.
Other People Are Reading
-
Retirement
-
If you've maxed out your contributions to a Roth or deductible IRA, consider using the cash value of life insurance for your retirement plans. The money grows tax-free and if you borrow against it, rather than cancel the policy, you never pay taxes on the growth. When you die, the loan comes out of the proceeds and you never pay tax on the growth of the money.
College Savings
-
Consider a whole life policy as a method to help pay for your child's college education. While some parents buy a policy on the child, the best method is to use a policy on the parents as the method to save. If the parent passes, it provides money for the child to attend college. If the parent lives, she borrows the cash value to pay college expenses. The loan doesn't require repayment until they're ready, if ever. The cash value doesn't count as an asset on a financial aid form.
-
Emergency Funds
-
If your personal economy suffered a setback, you might need to find a secret stash of cash. Most of the time, people put funds into a savings account, but because of the ease of accessibility, often raid the funds. In times of economic despair, there's no emergency money. Since the funds aren't easily accessible, whole life insurance cash value is available for these times of need. Once the policy cash value grows, use it as a supplement to your emergency funds.
Deferred Compensation
-
Employers can use a whole life insurance policy as a method of funding a deferred compensation agreement. If the employee retires, the cash for the retirement payment comes from the cash value. If he passes while working or at any point before the employer pays the full amount, the death benefit provides money. The proceeds go to the employer and then it makes payment to the widow or retiree. The company retrieves the premiums paid from excess death proceeds.
Mortgage
-
Get the benefits of owning mortgage insurance and pay off the mortgage early with whole life insurance cash value. As the assets grow tax-free in the cash value, you also have the benefit of money to pay off the mortgage if you or your spouse dies prematurely. Use the money and build up in the cash value to pay the mortgage off early.
No More Auto Loans
-
Don't go with hat in hand to your banker when you can be your own banker. Consider borrowing funds from your whole life insurance policy for your next automobile. Often you'll get a better deal on the car if you pay cash. The insurance company always loans you the money available. All you need to do is fill out the form identifying yourself as the owner, and request the amount of money you need. Make a payment book with the policy number and your name clearly appearing on each payment sheet. Pay yourself back so there's money for the next car.
-
