Life Insurance Living Benefits

Introduction

As the conversation regarding the purchase of whole life insurance continues, the benefits of doing so continues quietly going about blessing the lives of those who saw the good in purchasing the whole life product. 

Perhaps it might be fair to compare buying a whole life insurance product and investing in some other investment tool to the tortoise and the hare allegory we all grew up with. Hurrying and scurrying here and there with occasional rests along the way, the hare made its way through the race– while the tortoise just plugged along at a steady pace, every once in a while catching up to the hare while the hare slept. When the hare would wake up and find the tortoise had passed him, he would accelerate his progress and mock the tortoise when he caught up to him. 

The allegory ends with the tortoise reaching the goal first and the hare expressing his frustration in losing. I’m certain some of our “termite” enthusiasts would not agree the “whole life insurance tortoise” is a valid example to use while extolling the virtues of the whole life product, but they would be hard pressed to debunk the benefits available in so doing. 

Two Ways To Make Money 

When one begins to consider there are only two legitimate ways to make money–men at work and money at work–one has to weigh in on which area they will spend their energy in the process. If an individual works for a set salary or wage, it is easy to identify how much money will be earned; while on the other hand, where to invest money to make money, the water becomes very muddy and sometimes turbulent. It doesn’t take long for an investor to see that the higher the potential for making money, the greater is the risk for losing that same money. “A fool and his money are quickly separated” is one truism to be cognizant of as one labors to make that decision.

Investment Choices

If an individual determines a certain stock, bond, or mutual fund is appropriate for him to use to achieve his “money at work” strategy, he or she must also commit to a long term relationship. It takes time and good fortune for that strategy to bear fruit. If anywhere along the way funds are withdrawn, interest rates fall, the product loses its financial appeal, or some other catastrophe occurs, the projected returns will be impacted negatively.  

Let’s go back to the tortoise and the hare. 

The hare is like the stock market or a mutual fund. After you purchase it and the historical prospectus has been reviewed with the disclaimer that the past is not indicative of the future, you wait with baited breath to see what will happen. You find It has moments of incredible acceleration and moments when it is rather dormant. If you were to check in on the stock during one of its down times, you would or could panic thinking the race is lost; while if you caught it on the day of exhilaration, you would or could feel your “runner” was fast approaching the finish line. Either way, you would have to adjust your mental capacities to deal with the situation.

On the other hand, the old “whole life insurance tortoise,” after being purchased with the premium deposit established, you get a policy with a chart guaranteeing the cash value at any given year. The policy is placed along with your other important papers in a safe deposit box where it may get reviewed every other year–no excitement, just a note of acknowledgement. The policy though out of sight and mind is doing exactly what it was guaranteed to do. 

Real Life Story

Then, the opportunity presents itself for you to enter a partnership with another like minded entrepreneur in an auto parts store. There are already several other well known franchised auto part stores in town which makes your opportunity a little risky, but your partner is an certified auto mechanic and this store is equipped with a state of the art service bay which he can step right into and start making “bank.” Being a risky proposition, local financial institutions are reluctant to provide cash unless you are willing to pay a huge interest to get the loan. What to do? 

You then remember your tortoise whole life policy has a guarantee that you can borrow from the cash values and do with them whatever you want. One phone call and an electronic signature and the cash you needed to purchase the business appears in your bank account. No credit loan application or co-signers are required in order to convince the doubting banker you can make this work.  Depending when the life insurance policy was issued, your interest rate on the loan may be as low as 4% with no set monthly payment plan being required when you take over the business. Pay it back at your convenience at an amount you establish. 

The Grand Opening date sees the fulfillment of your dream to have your own business. To assure the fruition of this dream, life insurance policies are written to fund a buy sell agreement just in case there is an untimely death of either party. 

Twenty years later, your partner due to medical conditions of his wife, needs to move to Florida. He would like to turn his share of the business over to his son who has no mechanical or marketing skill or interest but needs a job. You have always had a good working relationship with your partner but his son’s entrance into the business will be like an albatross around your neck. In your attempt to find a source to cash out your partner, the same financial institutions see the weakness of the potential new partnership and will only provide cash at a high interest rate. Again, where to find funds to avoid new partnership and allow business to continue unencumbered by a high debt payment. 

Yes, you’re right!! The old tortoise whole life policy with which you had replaced the loan many years ago rises to the top again. Along with the cash value in the buy-sell agreement policies, the cash values in the old policy are sufficient to buy out the interest of your faithful old partner. His son will have to find a way to care for himself, but the medical needs of your partner’s ailing wife can be attended to; and he does not have to worry about the business staying afloat long enough for him to recoup his financial investment. 

Everyone is in Happy Valley because the old tortoise just kept steadily moving along its guaranteed path to financial success.  

Examples of Other Living Benefits of Whole Life Insurance

Oh, I forgot to mention that during the lifetime of this insured he also used the cash values to pay for his daughter’s college tuition and wedding, his son’s dream of working for an NGO in Ghana, emergency payment for hospital expenses, large cash contribution to local homeless facility, restoring a 1955 Chevy Corvette, down payment for his son in law to buy out his auto parts store when he was ready to retire, and a two-month ocean cruise to celebrate retirement.*

Yes, his hare did very well even with its ups and downs, but his old tortoise whole life insurance policy was always like a warm blanket around his shoulders. He could always count on it with no fanfare or attention. Never once did he check the stock market report to see what his cash values had done that day.  He just had to pay the premium which never was a burden knowing what the payment truly represented–peace of mind.

*These are examples of how cash values in life insurance policies can be used for living benefits.