Life is pretty long. One of the key aspects to success is good financial management. Let’s look at how you can dominate your finances. We recently did an article on college fund with a bonus. In that article we show a couple of generic illustrations of juvenile policies. Here we want to focus on a different use of life insurance. For adults in productive years, the main benefit of life insurance is the principle of instant estate. When you get a life insurance policy, you immediately have a cash reserve should you pass away, which can take care of your loved ones, protect the assets you left behind, etc. That’s instant estate!
Using a life policy to control your spending
Using a whole life or universal policy is a great way to get yourself to put aside money regularly. In addition, the instant estate protects your assets and loved ones. It is common sense that by putting money away regularly, it will pile up. But, are you disciplined enough to keep it there? Let’s say that from each paycheck you put money in a savings account. How often does a situation come along that you just say to yourself, “I’ll borrow from there and pay it back with next paycheck,” when was the last time you did that? And how much money did you put back?
Exactly. That’s where a long term commitment comes in handy. Taking money from a savings account is just a few clicks away. Taking in from a policy is a process. This helps you take control over impulse shopping for example. Another pitfall is the start itself. Say you put a $1000 or a few thousand dollars away. Here again, when the amount is low, you’ll very easily say, “Yeah, it’s just a $1000, I’ll start next month again.” As you can see in the illustrations below, at the start, a life policy has zero cash value. That helps you overcome the start, gets you more committed to securing finances for your future.
Dominate Your Finances and Get Future Financial Security
Committing to a financial vehicle such as a life insurance policy, you show that you are serious. You mean business, and you will not back out in a month. It is an instrument, which helps you take control of your future by avoiding bad spending habits. It aids you in dominating your finances. Gets you committed and protects your lifestyle. Below are two illustrations to give you an idea. And since we want to be serious, we’ll avoid using putting away hundreds. Both illustrations are 10 year pay whole life policies for someone age 40. Illustration in image 1 is male, illustration in image 2 is female. Ladies win as usual.
Policy Performance and Advantages
You want to make a serious, long term commitment? Well, let’s talk about money, not pocket change. Both illustrations are set for a $50,000 annual premium. At first glance you can see right away that with same rating and age, women get more for their money. The top thing that should also put you at ease is that for $50,000, you are buying a legacy, asset protection of $1.6 million, i.e. $1.8 million in case of woman. What that means is that should something happened to you the first year, your legacy receives 30 times more than what you put in. However, no one buys a policy to die the next day.
So, you keep paying your premiums for 10 years. This funds your policy with $500,000. At age 50, payments stop. And what happens then? The policy (coverage) continues on. And the policy yields paid up additions (i.e. dividends). No matter what happens to the market, you are guaranteed your more than triple coverage from day 1. After ten years, you stop paying premiums and money grows on its own. By the age of 70, you are guaranteed $900,000+, but even possibly as much as $1.3 milion. If you do not use the money, meaning you do not take any distributions, you are leaving a legacy of up to $2.6 million to your heirs. Is that a way to dominate your finances or what? You paid for 10 years, and created a legacy worth 5 times more!
To Dominate Your Finances Means to Have the Money Available to You
The amounts in the surrender value column are always available to you at any time, should you need the money. For example upon retirement, you can take annual distributions, or loans. We discuss this topic more in the article here. Any amount of money you take, lowers the death benefit, but unless you decide to cancel the policy altogether, you are always guaranteed the original face value.
The illustration snapshots shown here are very simplified. All policy illustrations go into much greater detail. Their values also depend on your age and health condition. If you’re interested in getting more information about these two generic illustrations, or want a personalized quote, just follow this link here. We can prepare a personalized illustration and start a discussion, while answering your further questions.