There are specific life insurance policies that can become a financial asset to you. Think of it like an investment account, such as an IRA or mutual fund.

Permanent Life Insurance

Permanent life insurance policies allow you to invest in conservative investments, like mutual funds or ETF’s. You can customize your investments, allowing your policy to align with your goals and risk tolerance. There are two types of permanent life insurance.

Whole Life Insurance

Whole life insurance is the most common type. This policy allows you to accumulate cash value. When you pay for the policy each month, a portion of it is placed onto a cash value account. This is basically a savings account component with the life insurance policy.  It is noteworthy that the premiums on these policies typically won’t increase over the life of the policy.

Universal Life Insurance

Universal life insurance is the second type that allows policymakers to grow an asset over time. What sets this one apart is that the premiums are not set and can change at any point. There is something called “variable universal life insurance” which allows investors to have more freedom over their investments. This could lead to higher returns in the long run.

How To Use Your Policy

To use your life insurance policy as an asset you must grow your investments and develop the power to borrow against what you have saved. These earnings are also growing on a tax-deferred basis.

• Use your policy as collateral for a loan: This will help you get approved for a loan or potentially get a better rate on the loan. This is a form of showing lenders that you are trustworthy as a borrower.
• Take a loan from your policy: You can borrow against the cash value of your permanent life insurance policy. When you do take a loan from your policy and it is not paid off by the time of your death, then that benefit is subtracted from what your beneficiaries would have received.
• Withdraw funds: You can simply take money from your policy that is cash. This is also money that will not be paid to your beneficiaries later. If your withdrawal is a large amount, then you may pay taxes from dipping into your investments.
• Option for accelerated benefits: This option is available in a time of severe medical emergencies.
• Surrender the policy: You can cancel your insurance policy and get back the cash value that you put in. Keep in mind to read the fine print, because often time there are quite high fees when doing this. Similarly, if you to withdraw from a retirement account early.

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