Life insurance is first and foremost just that: LIFE INSURANCE! And in many cases the death benefit paid out by life insurance policies is the most beneficial and useful aspect of the product. But the ability to aggressively build cash value and borrow from it tax-free can be an equally attractive and in some cases crucial part of one’s planning.

Consider using Tax-Free Loans for:

  • College funding – Did you know that “Free Application for Federal Student Aid” (FAFSA) doesn’t look at the cash inside of a life insurance policy as an appropriate means for funding college education? That means that in many cases life insurance can be a used as a tool to help cover the cost of these expenses without disqualifying your children or grandchildren from student aid.
  • Unexpected expenses – Depending on how it is structured, life insurance can offer growth potential without sacrificing much needed liquidity in times of emergency. And, since loans are borrowed from the policy on non-qualified (already-taxed) dollars, there is no limitation on how old one needs to be to withdraw funds from the account.
  • Business needs – Life insurance can be structured to provide cash benefits to owners while also providing valuable coverage to the business. You can read more about this in the What Will Happen To My Business topic.
  • Retirement – Many people find themselves deep into retirement with a life insurance policy that they may not need anymore. By choosing a policy with lots of growth potential, you can allow yourself the flexibility of utilizing the cash within your policy to supplement your other sources of retirement income tax-free.

Long-term cash accumulation:

  • One of the key features of both whole life insurance and indexed universal life insurance is that your principal is protected from market volatility – it is kept safe and sound in the insurer’s conservative portfolio earning a low, safe rate of return.
  • In fact, no one has ever lost their money to market volatility in these kinds of policies.
  • However, higher returns can be achieved by using just the low yield to safely link your growth to a market index, such as the S&P 500. In this way, your principal is kept safe while exchanging the low guaranteed return for the potential to earn many times that.
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