How Life Insurance Can Help You Build Wealth | Farm Bureau Insurance (2024)

FAQs

How Life Insurance Can Help You Build Wealth | Farm Bureau Insurance? ›

Life insurance policies, such as Farm Bureau Insurance's whole life policy, often come with a cash value component. As you pay your premiums, a portion of them goes towards building a cash value within your policy. Over time, this cash value can grow on a tax-deferred basis, and this allows you to accumulate wealth.

People primarily use life insurance to build wealth for the next generation, so that a family doesn't suddenly find themselves penniless. Often, beneficiaries will use a life insurance payout to pay off a mortgage, fund college educations and pay bills until jobs or careers can be established.

Life insurance can provide more than just a cash payout to surviving family members. When used strategically, it can also be a powerful legacy planning tool. The right policy can offer a financial safety net for your family—and a way to grow your wealth during your lifetime.

How can you use life insurance to build wealth? Term life insurance can be used to build wealth across generations by providing a payout to your surviving loved ones. The death benefit can be used to pay estate tax, as well as preserve remaining assets.

Leveraged life insurance lets you grow your cash value faster using the bank's money. You put in 25%, and the bank adds the other 75%. You start out earning interest on the total without the risk of loss.

Term life insurance can help your family build generational wealth if you pass away during the contract term. Term provides the most death benefit per dollar of premiums and is a great tool for clients who need to save for additional financial goals.

If there is a certificate of deposit or some other investment you are interested in, it could be worth taking out a loan from your life insurance policy. You might also take out cash or a loan to invest in a business that your son or daughter is starting, helping both your child and you build wealth.

Strategies for building generational wealth include investing in education, financial markets, and real estate, and creating and preserving assets. Maximizing tax benefits and avoiding debt are crucial for building generational wealth.

If you need to borrow money for any reason, you can do so by taking a loan against your life insurance policy. The interest rates on these loans are typically much lower than rates you would get from a bank or other lender. 5. The death benefit is paid tax-free to your loved ones.

What creates 90% of millionaires? ›

Real estate investment has long been a cornerstone of financial success, with approximately 90% of millionaires attributing their wealth in part to real estate holdings.

Tax law grants tax benefits to life insurance premiums and proceeds, affording asset protection in the process. The proceeds of life insurance are also tax-free to the beneficiary. 1 This could be appealing to an individual with a higher net worth or to anyone who seeks to minimize estate taxes.

For example, the Rockefellers used a series of irrevocable trusts that helped pass down wealth to future generations. These Trusts both fund and remain funded through premium life insurance policies, and include strict stipulations that protect the family from the risk of irresponsible behavior.

Wealthy people buy cash value life insurance so they can utilize it for its living benefits. Life insurance purchased by wealthy people and businesses is often used as a vehicle for providing liquidity, reducing financial liabilities, and reducing their tax profile.

Life insurance can be used to buy a house. You can use your policy as collateral for a mortgage loan. If your policy has cash value, you could also take the money out for your home purchase. These financial strategies aren't just limited to buying a house.

Yes, it can be done. If you have the right type of life insurance – whole life or universal life – and have been making on-time payments to it for an extended period, you may have accrued enough “cash value” in the policy to bury your credit card debt.

A variable life insurance policy takes things one step further by allowing you to invest your cash value in sub-accounts similar to mutual funds. This could increase your returns but also introduce additional risk due to market fluctuations.

Insurance can help mitigate risk in your financial plan.

Perhaps the most common reason to own life insurance is to reduce risk. If your family's primary income provider passes away, life insurance can help fill the resulting financial void.

Life insurance is a great wealth transfer asset because the proceeds are inherited estate and income tax free, and can be used for goals like providing liquidity to pay for estate taxes, or transferring wealth directly to your beneficiary(ies).

The payout from a life insurance policy can be used to leave an inheritance, settle a buy-sell agreement for your business, pay your final expenses, or to reduce and/or settle your estate taxes with the IRS when you pass away.