Category: Life Insurance

If you’re like most Americans, you know that Life Insurance can financially protect your family. When you pass away, your loved ones can use the Death Benefit to cover expenses and outstanding debts. However, Life Insurance is much more than a financial protection tool. In fact, you have the (very cool) ability to treat it as your personal bank. Let me explain.

Some Life Insurance products – called Indexed Universal Life (“IUL”) – allocate a portion of each premium to a savings fund that grows with interest. One of the many ways you can leverage this Cash Value Account is to take a loan against it. While a bank can also help you save and borrow money, an IUL product can do so with several distinct enhancements. For example:

• The interest rate to grow your Cash Value Account can be tied to a stock market index, like the S&P 500. Thus, IUL products give you the potential to build significant wealth.
• That being said, your Cash Value Account doesn’t decline when the stock market index drops, since IUL products contain a guaranteed minimum interest rate.
• No income verification or credit check is required to get a policy loan. Because there’s no approval process, you often receive the loan amount in three to five business days!
• Furthermore, you don’t have to use assets as collateral to get a policy loan. The Death Benefit is essentially your collateral. If you don’t repay the loan, the Death Benefit will be reduced.
• The money received from a policy loan is tax-free.
• Policy loans will not appear on your credit report.
• The interest rate to repay the policy loan is typically lower than the rate on traditional loans. Additionally, your credit rating has no bearing on the interest rate.
• Last – but certainly not least – the borrowed money continues to grow in your Cash Value Account as if you never took it out. (Side note: I thought this was a misprint when I first read it, but trusted experts confirmed it for me.)

As long as you repay the loans, you can repeat the cycle of building up your Cash Value Account and borrowing against it. Appropriately, this looping concept is known as “infinite banking”.

The next time I invade this space, I’ll explain how infinite banking can be utilized to achieve your financial goals. (I’ll give you a few hints though: retirement, college, real estate, and expenses.) Until then, please keep in mind that Life Insurance is a powerful – yet underrated – financial tool. Not only can it protect your family when you pass away, you can leverage it to accumulate wealth and borrow from yourself (instead of traditional banks and lenders).

For more information, my email address is insuritystreet@gmail.com. The consultation is free with no obligations.

Life Insurance is one of the building blocks of a sound financial plan. Without it, an unexpected death may force surviving family members to use their retirement and college savings for other, more immediate needs. If you have loved ones who depend on you financially, the difficult question isn’t “Do I need Life Insurance?” (Hint: The answer is “yes!”) Instead, it’s “How much do I need?”

Many Americans are aware that Life Insurance covers funeral and burial expenses. What is not as commonly known is that Life Insurance covers so much more. If you’re a breadwinner, you can get a policy that maintains your family’s quality of life for years after your death. If you have children in particular, you can also ensure they have the means to pursue their dreams. To accomplish these goals, consider all of the expenses that your family would have to bear after you pass. They include:

• Immediate Expenses such as funeral and burial costs, unpaid medical expenses, the mortgage or rent, car loans, credit card debt, and personal loans.
• Ongoing Expenses such as food, utilities, transportation, health care, and insurance (home, auto, medical, etc.).
• Future Expenses such as college tuition and retirement savings.

Aggregating these expenses would certainly be a comprehensive way to determine how much Life Insurance you need, but it would also be very time-consuming (unless you’re already tracking most of them in a money management tool). Fortunately, there are a few rules of thumb you can use instead.

The first is called the DIME Method, which stands for Debt, Income, Mortgage, and Education. In short, you can estimate the coverage you need by adding:

• Existing Debts,
• Your annual Income (times the number of years until your children reach 18 years old),
• The balance of your Mortgage, and
• The cost of a college Education (times the number of children).

Another rule of thumb is called the 10x Method. Quite simply, you can estimate the coverage you need by multiplying your annual income by 10. (If you want to get “fancy”, you can then add $100,000 per child to include college tuition.)

Perhaps you’re doing the math in your head and thinking: “Wow, I need a lot more coverage than I expected! How much would I have to pay for it?” If so, you may be surprised to know that Life Insurance is not as expensive as you think. According to the 2022 Life Insurance Barometer Study, “More than half of Americans overestimate the cost of Life Insurance by as much as THREEFOLD.” So, for your consideration, please don’t let the misconception of cost prevent you from securing your family’s financial future.

Life Insurance is a powerful, affordable, and necessary component of your financial portfolio. If you have loved ones who depend on you financially, a robust policy can maintain their standard of living for many years after your death. Fortunately, such coverage is not as expensive as you may think, so please explore your options… and get some much-needed peace of mind.