Whole Life: A Surprising Source of Cash When Times are Tough
December 16th, 2009 // 3:58 am @ Andrew Rosenbaum
This past September, the Wall Street Journal printed a special section entitled “The Resurgence of Whole Life Insurance.”
Many more people are considering whole life insurance these days because it’s one of the few assets that has retained its value during the economic downturn.
It’s interesting that the WSJ focused on a little-known advantage to this great life insurance product –- a benefit you should know about if you’re a business owner.
If your business runs short on cash –- and most businesses are suffering from a cash crunch in this recession –- you can borrow against a whole life policy without incurring the onerous fees and penalties of borrowing against traditional retirement accounts.
To quote the article,
Whole life, or permanent life, as it is also called, is experiencing a revival of interest as a long-term investment to weather difficult economic times. Aside from the death benefit, the insurance provides a tax-deferred buildup of cash value that can be borrowed against on a tax-favorable basis, providing a ready source of capital when other sources of money are problematic or hard to come by.”
Whole life has both a “living” and a death benefit. You can assess the accrued cash value of a whole life policy at any time.
I’ve seen how useful this can be. The cash helped one of my clients through a business downturn.
The whole life policy he had purchased years ago had built up a considerable amount of cash. He was able to withdraw a part of the cash value at no penalty.
Because he withdrew the money personally, it didn’t affect the credit rating of his business. Although he repaid the loan, the fact is he didn’t have to. The amount one withdraws from a policy can be deducted from the policy’s payout.
The bottom line is this: A whole life insurance policy that has been given a chance to grow is an asset that’s “got your back” if you need it.
If you’d like to read the entire Wall Street Journal section, please contact me and I’ll send you a copy.
Category : Business Planning &Life Insurance &Permanent Insurance &Recession
