Cash Value Life Insurance is a Financial Tool
Good day,
Many of our clients and relationships know the importance of having financial tools or vehicles to help them reach the optimal financial destination. Common financial tools are non-registered investment accounts, real estate, registered investment accounts, operating companies, and holding companies, to name a few.
One often misunderstood financial tool is permanent cash value life insurance policies. Now you are thinking that most insurance is a liability or something you and your business must pay money into with no reward today. Most insurance policies are viewed as something that helps when you are dead, but that is not the case.
Permanent cash value insurance policies build up equity as you make your payments. Like real estate, you can access that equity when you sell the property or refinance the property and pull out the equity. Buying a permanent life insurance policy with cash value has the same options. You can transfer that equity to your estate or “refinance” and pull out the equity.
Some common ways of taking that equity out of a policy are:
A third-party loan.
Using the insurance as collateral or;
Taking a policy loan from the insurance company.
The value of the insurance policy will secure these loans. This may be a good idea because you need the insurance in place but also want access to your money to invest in other projects or back into your business. The funds you are borrowing do not stop the compounding of the funds inside your policy. This means that the insurance cash value will continue to compound while you can use the borrowed money to invest where needed.
Another benefit is that you can now deduct the interest on the borrowed funds if you are using them to do business! Business owners often take advantage of this strategy to maximize their financial situation. This might be an ideal investigation strategy if you have a permanent policy with cash value. If you are on the fence about if you should buy a permanent policy, this might give you comfort to know that your money is accessible.
We can help you in both these situations. We can give you the information you need to make a better-informed decision. Many people misunderstand the power of insurance and don’t see how this asset class can be used to maximize their estate when they are dead and their business now and in the years to come!
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