This article explains how you can build generational wealth with life insurance.
Is your financial goal to achieve generational wealth? Permanent life insurance can pass tax-advantaged assets to whoever you pick as your beneficiaries. But not all types of life insurance offer the same guarantees. This article explains how you can build generational wealth with life insurance.
Understanding Permanent Life Insurance
Permanent life insurance, such as variable, universal, and whole life policies, pays a guaranteed death benefit. It also has built-in savings, known as cash value, if you pay your premiums. Based on your insurance policy, the cash value in permanent life insurance increases every time you pay off your premium. In some cases, you will have guaranteed returns, and in others, the returns differ due to the performance of a sub-account or an index. Additionally, some plans pay out dividends that can assist you in building wealth with life insurance.
Depending on your insurer’s interest rate and rate of return, it’s possible to pull out a policy loan and still receive net positive interest earnings. One life insurance type pays a guaranteed rate of return in spite of the outstanding policy loans. This signifies you can borrow a dollar and earn interest on it simultaneously. Overall, your policy’s death benefit goes to your heirs, not the cash value, when you pass away.
Variable Life Insurance
Variable life insurance grows cash value based on the performance of market-based accounts such as bonds, equities, and money market accounts. You may also insert your cash value into these accounts to achieve generational wealth with life insurance when the accounts do excellently. However, the cash will lose value during a market downturn. Therefore, working with a financial advisor or reducing risk as much as possible is always ideal, if necessary.
Universal Life Insurance
You may invest the cash value into these S&P 500 or in investments held by the insurance company or keep it and earn a low, guaranteed rate of return. Fortunately, your policy’s rate of return will replicate that performance if you invest when these investments and indexes do well. Keep in mind that universal policies might cap growth, restricting your earning potential. However, they are slightly less risky than variable policies.
Whole Life Insurance
Whole life insurance gains a guaranteed rate of return when you buy the policy. Your policy protects it and is available when you need to use it. Additionally, there is no risk of losing cash value in this policy. You’ll also know how much your plan earns within a year and be able to budget for family expenses or investments accordingly.
Contact Malden Solutions today at 410-435-4937 to learn more about how to build generational wealth with life insurance.
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