How Life Insurance Can Help You Build Wealth | Farm Bureau Insurance (2024)

FAQs

How Life Insurance Can Help You Build Wealth | Farm Bureau Insurance? ›

Life insurance policies, such as Farm Bureau Insurance's whole life policy, often come with a cash value component. As you pay your premiums, a portion of them goes towards building a cash value within your policy. Over time, this cash value can grow on a tax-deferred basis, and this allows you to accumulate wealth.

Use Life Insurance

Life insurance provides a tax-free benefit for the next generation in the event of your death. Even if you haven't been able to accumulate many assets for your heirs during your life, the death benefit from a life insurance policy can create wealth where none existed before.

People primarily use life insurance to build wealth for the next generation, so that a family doesn't suddenly find themselves penniless. Often, beneficiaries will use a life insurance payout to pay off a mortgage, fund college educations and pay bills until jobs or careers can be established.

Insurance can help mitigate risk in your financial plan.

Perhaps the most common reason to own life insurance is to reduce risk. If your family's primary income provider passes away, life insurance can help fill the resulting financial void.

For cash value accounts, the insurer takes part of your insurance premium and puts it into an account intended to increase in value over time. Some cash value accounts invest your money in index funds or stocks, while others provide a guaranteed rate of return like a savings account would.

The cash value component offered in most permanent life insurance policies is the primary vehicle for investing with life insurance. As you pay premiums on these policies, part of each payment funds the death benefit while another portion goes into an account that grows tax-deferred over time.

Protection: Wealth insurance provides the protective benefit of a life cover, which keeps your family secure, always. Tax benefits: Apart from protection and savings, wealth insurance plans also offer tax benefits as per prevailing tax laws.

Why is life insurance important? ›

Buying life insurance protects your spouse and children from the potentially devastating financial losses that could result if something happened to you. It provides financial security, helps to pay off debts, helps to pay living expenses, and helps to pay any medical or final expenses.

Life insurance covers the insured person's life. So if you pass away while your policy is active, your beneficiaries can use the payout to cover whatever they choose — medical bills, funeral costs, education, loans, day-to-day costs, and even savings.

This protection helps safeguard your assets and maintain your standard of living during challenging times. Long-Term Financial Planning: Insurance could play a crucial role in long-term financial planning by providing stability and security for future goals and objectives.

This strategy involves using your IUL account as your own personal bank. Instead of borrowing money from traditional banks, you borrow from yourself. You pay yourself back with interest, and the interest you pay goes back into your IUL account, further increasing its cash value.

The cash value within a whole life policy grows without income taxation for the individual. An additional benefit of life insurance compared to other assets is the tax treatment of the death benefits. Regardless of the type of life insurance policy, the death benefits are free from income tax16.

Yes, it can be done. If you have the right type of life insurance – whole life or universal life – and have been making on-time payments to it for an extended period, you may have accrued enough “cash value” in the policy to bury your credit card debt.

There isn't even an agreed-upon definition of how much it takes to have generational wealth. I mean, generational wealth is just a fancy phrase that we used to call an inheritance. If you leave $1,000 to your kids, they've technically got generational wealth!