As the last quarter of the year approaches, the challenging economic conditions as of late have been a painful lesson in volatility for many people. As a result, people may have experienced significant negative shifts in their net worth this year. Some were heavily weighted in volatile assets, such as cryptocurrency, which experienced a drop in market value of over 70%. In times like these, one of the most significant assets shines in its ability to provide stability.
A permanent life insurance policy with a guaranteed premium and death benefit, such as Whole Life, can be an excellent non-correlated asset that won’t rise and fall with stock market fluctuations. Owned properly, it won’t increase estate taxes at death. It also avoids the risks of illiquid assets that may not be convertible into cash when needed. As such, it can provide an element of a client’s wealth transfer plan that is rock solid, which allows flexibility for the client in their other planning and asset choices.
“A PERMANENT LIFE INSURANCE POLICY WITH A GUARANTEED PREMIUM AND DEATH BENEFIT, SUCH AS WHOLE LIFE, CAN BE AN EXCELLENT NON-CORRELATED ASSET THAT WON’T RISE AND FALL WITH STOCK MARKET FLUCTUATIONS.”
Having guaranteed liquidity could mean not holding more liquid assets than desired and taking on more investment risk knowing there’s a backstop. While Whole Life contracts provide guaranteed premiums and cash value growth, today’s modern IUL products also have the safety of a floor in their index strategy while maintaining the upside potential.
THIS BENEFIT OF THE FLOOR ALSO MEANS THE POLICY OWNER DOESN’T NEED TO “REBOUND BEFORE THEY COMPOUND.”
At ARI Financial, premium financing is the driving strategy that allows the purchase of life insurance contracts while saving money by protecting liquidity best deployed elsewhere. While the costs and risks of borrowing are well known, the benefits are often overlooked, mainly when using leverage to position large life insurance policies. However, when implemented carefully, borrowing can be a vital tool to help families meet their goals and address risks while preserving cash and reducing transaction costs. Increasingly, affluent individuals and families are extending their leverage to the life insurance asset class by financing some or all the premiums for policies used to fund future personal and business liabilities such as estate taxes, generational wealth transfer, and business succession liabilities.
