Life insurance can be about much more than just providing for your family if you pass on. Of course, it can give you and your family peace of mind that they will be taken care of if the worst happens. What you may not know, however, is that certain types of life insurance can also be a vehicle for building wealth in the long run. Here is some more information on the various types of life insurance that you can buy.

Traditional Whole Life Insurance

A traditional whole life insurance policy offers you a guaranteed death benefit along with a savings component that helps you build wealth. In a nutshell, you make your policy payment every year, and the company pays you dividends over time that get credited to your cash value. This becomes a type of bank account for you to draw from as you need money. You also get lifetime coverage for this type of policy in a guaranteed contract.

This policy is good for your entire life. A whole life insurance policy will not lapse, nor will you need to renew or get a new policy. The insurance company invests your premiums, and this is where the growth of your cash value happens. While you do not direct the investments, the insurance company will pay you based on how the insurance company performs in its investments and overall finances. This is why we only recommend using about 10 Insurance companies across the US.

If there is any drawback to a traditional whole life policy, it is that it will be more “expensive” than a term insurance policy. Remember though, everything with the Insurance Carriers is cost vs risk. They are 100% obligated to pay your death benefit and build your cash value every single year. Moreover, with a whole life insurance policy, your premiums will be constant and not change over time and your cash value is guaranteed to increase every year. You will absolutely get more out of it than you put in if you keep it for your Whole Life.

Term Life Insurance

This is one of the most common life insurance policy types that people associate with insurance. If you are trying to contextualize what term life insurance is like, think of it as renting a home instead of buying one. You will still have the benefit of having protection, but you are not necessarily building up any equity.

A term life insurance policy is one that you have for a set period of time until the policy expires. Usually, you can buy term policies that last from 10-30 years. You will receive a price at the beginning of the policy, and this will be the fixed premium that you pay until the policy term ends

One of the benefits of a term life insurance policy is that the premiums tend to be lower. However, along with the lower premiums comes the fact that you are not building up cash value after you make your payments. While term life insurance will pay the full death benefit if anything happens to you, once the policy term ends, you also have nothing to show for it.

One important lesson we teach our clients is that there are no deals with the insurance company. They base their products on a cost vs risk scale. This simply means that term insurance is “cheap” because there is 99% they won’t have to pay a death benefit claim during that term period. We don’t discourage anyone from buying term insurance, but we do believe in educating them on how it really works. Start by asking yourself the right questions based on what your financial goals are!

Universal Life / Variable Life and Indexed Universal Life Insurance

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In an effort to compete with the stock market boom in the 80s many insurance companies sacrificed their reputations and products by unbundling the guaranteed contracts that they had in Whole Life and created these hybrid policies. These policies should not be considered permanent life insurance because they offer no real guarantees to the consumer. The risk is taken off the insurance carrier and placed onto the unsuspecting consumer in an attempt to “get a higher rate of return.” These hybrid policies are not savings vehicles, they should be considered speculative investments. We do not recommend using a universal policy for Infinite Banking.

To learn more about how you can build your personal wealth or ensure that your family is taken care of in case something happens to you, contact the financial professionals at Factum Financial. We can help you plan for the future.

Why Banks Buy Whole Life Insurance

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