Should You Consider A Cash-Value Life Insurance Plan?


Should You Consider A Cash-Value Life Insurance Plan?

Posted by Infinite Wealth Advisors, LLC
8 years ago | October 24, 2016

PAre you currently maxing out your retirement plan contributions, but still looking for a way to expand your savings opportunities? Do you fall into one of the higher tax brackets, and need a way to pass assets to your heirs while bypassing the estate tax? There are several reasons that a cash-value life insurance plan could be the answer to your dilemma.

How a cash-value life insurance plan works. Most people are familiar with traditional life insurance policies. You sign a contract with the provider, make premium payments for a predetermined period of time, and then if you die during that time, your beneficiaries collect a “death penalty” in the amount of the contract. It’s pretty straightforward, and protects your dependents against the loss of your income.

A cash-value life insurance plan works a bit differently, because it builds cash value over time. You can actually access this value during your lifetime, for various reasons, so it works a bit more like an investment than simply a protective policy. It can also help you protect some of your net worth from the estate tax when you pass away, because assets held in a life insurance policy are not subject to the tax.

There are some important things to know if you’re considering a cash-value life insurance plan. If you do decide to invest in one of these contracts, consider following these guidelines:

  • set it up like an investment from the start
  • minimize the death benefit
  • overfund the policy to the MEC line
  • minimize fees and expenses
  • fund the policy annually (instead of monthly)
  • pay it up as soon as possible, to minimize required future payments
  • ensure that only a reasonable percentage of your assets are being diverted to this investment vehicle

A cash-value life insurance plan is not right for everyone, but it could be a good fit for you, depending upon your needs. To learn more about this unique insurance product, give us a call. We can help you weigh your options, and decide if this product is right for you, or another one might be a better fit.

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