Cash value life insurance is an extremely unique asset in the world of investing. There are a few characteristics which separate it from most other investible asset categories.
Below are a few of the defining characteristics of cash value life insuance:
- Investment Safety and Stability: As a policy holder, you have a contract with an A+ rated corporation that ensures your investment cannot lose money. Sometimes this is called a 0% loss floor, meaning you cannot have a ‘negative’ return in a given year. Uniquely, cash value life insurance companies are required by state regulation to carry $1 in cash (think checking account accessible cash) for every $1 they have invested in the market. Comparatively banks are required to only carry $0.17 for every $1 they have invested or loaned out.
- Guaranteed Rate-of-Return: In guaranteed cash value policies, you are guaranteed a rate-of-return.
- Equity Building Asset: Cash value life insurance policies build equity. Unlike term insurance where you are basically ‘renting’ the benefits, with cash value life insurance your benefits are with you for life as long as the policy is in force (read more about how the Flexmethod ensures your policy is always in force).
- Crazy Good Tax Benefits: All life insurance policies pay out your beneficiaries TAX FREE. Meaning if you have a $1,000,000 death benefit, at the time of your death your beneficiaries will get $1,000,000 cash. This amount is never taxed.
- Income Cash Tax Free: Because your policy is building ‘equity’ you can borrow from the equity (just like a home equity line of credit). Like all loans, the money you take out of your policy always comes out tax free.
There are many more benefits of cash value life insurance when the Flexmethod is applied. Speak to one of our experts today to hear how we can help you build tax free income.