Recent volatility has renewed recession fears among investors young and old. Similar to 2008, investors are wondering if there are any safe places to put money today. Life insurance products continue to provide not only the death benefit protection consumers need, but it can also be used for a variety of supplemental funding needs.
Today’s life insurance products continue to offer flexibility and opportunities for advisers and their clients. When you consider our economy’s present volatility, it is possible that life insurance might offer clients another accumulation vehicle, above and beyond more traditional investment options.
According to the Association for Advanced Life Underwriting, over 75 million families rely on products provided by the life insurance industry and there is currently $18 trillion of life insurance covering the lives of Americans today. These facts combined with the industry’s investment of $4.6 trillion into the U.S. economy, makes the life insurance industry a solid and profitable place for Americans to find financial stability.
Why Should Permanent Life Insurance be Considered an Asset?
Today, the argument can be made that permanent life insurance is an asset along with traditional vehicles like stocks, bonds and commodities. Most importantly, life insurance policies provide clients with death benefit guarantees. However, policies may also offer guaranteed interest rates of return backed by the issuing insurance company. If growth is desired, paired with a willingness to take on risk, variable life insurance products allow for tax-deferred growth of the cash value through a variety of underlying investment options.
Death benefits from a life insurance policy can help families with their estate planning needs or replace income provided by the insured at the time of his/her death. It’s also an excellent asset to bequeath to a charity and permits grantors the ability to spend down corpus while guaranteeing legacy.
Favorable Access to Liquidity:
While cash value of life insurance generally grows slowly in the early years of the policy, it can provide the client with a significant source of funds with favorable access to liquidity in later years. Loans and withdrawals, up to cost basis, can be made without immediate tax consequences – providing the policy holder is careful not to lapse the policy. Low interest rate loans with no pre-qualification for the loan can also provide an excellent source of capital during economic turbulence or alternative expenses (i.e. college expenses). Of course, loans and withdrawals will reduce life insurance policy cash values and death benefits by the amount taken plus any applicable loan or withdrawal charges.
The Tax Advantages: