Cash value life insurance is a safe and powerful wealth planning tool to boost wealth for retirement life or inheritors. Instead of paying entire premium in cash, premium financing is an alternative to pay for premium. Premium financing enables you to lower out-of-pocket costs while maintaining the same level of wealth accumulation prospects and life coverage.
Tom, age 50, decides to allocate $0.5 million cash in a cash value life insurance plan. With objective to maximize his wealth accumulation prospects and life coverage, Tom compares the estimated cash surrender value and death benefit accumulating in his life insurance policy under financing and non-financing situations.
First situation: Tom owns an insurance plan with $2 million of lump sum premium with cash outlay $0.5 million and premium financing arrangement.
Benefits that Tom receives from his cash value life insurance plan grow over time. At policy year 30, net cash surrender value and net death benefit in his life insurance policy would reach $5.48 million and $6.71 million. At policy year 50, the numbers would increase to $18 million.
In addition, portions of the cash value in his policy are withdrawable to fund capital needs for business, housing, retirement, or unexpected emergencies.