The previous two columns reviewed the financial miracles of compound interest and tax-deferred compound interest. Now, we must discuss the greatest financial miracle of all: leveraging.

Leveraging is when pennies can buy dollars or when one dollar can do the work of many dollars, and it’s designed for economic times like these. Challenging times require our clients’ dollars to work as efficiently as possible. These dollars must protect against calamity and simultaneously achieve financial goals. Our responsibility as insurance and financial professionals requires three essential duties: protection, safe growth and efficient provision of benefits.

The greatest leverage that we provide is income. When families, businesses and estates need income because of premature death, we provide the appropriate amount at the exact time it is needed.

Cash-value insurance
But we recommend cash-value insurance because there are many times income is needed when there isn’t a death. Job loss, sudden illnesses and other catastrophic occurrences come to mind. If none of these unfortunate events occur, the money can then be used for happier things like extra retirement income.

The cash values are guaranteed, and taxes won’t impede maximum growth. The values can be accessed whether you are dead or alive without income tax liability. If your client believes that taxes will be higher in the future, there is no better benefit available.

But the most advantageous benefit of cash-value insurance is leveraging, which can also be found in term life insurance, linked life insurance policies that provide death benefits, safe growth and long-term care or critical illness benefits when needed.

Long-term care policies, critical illness coverage, catastrophic illness and cancer policies, Medicare supplements, even health insurance are all products where one
dollar does the work of many dollars.

Leverage provides these benefits:

  • Income replacement
  • Mortgage satisfaction (business and personal)
  • Estate tax reduction
  • Income tax reduction
  • Increased charitable gifts
  • Ease of estate transfer
  • Estate expansion
  • Increased wealth transfer
  • Inflation offset (This will be a vital benefit in the coming inflationary decades.)
  • Debt satisfaction (Debt signals the need for life insurance. If your prospect can’t afford the premium, their family can’t afford the problem.)

Financial miracles like leveraging will help your clients survive and then thrive in the decades ahead.