Six Reasons You Should Invest In A Participating Whole Life Insurance Policy For Your Children
As a new parent or grandparent, your new bundle of joy has your complete attention. You may be thinking, “how can I provide for them and, set them up financially for what life has in store?”. Afterall, you want to ensure they have an easier time in life, financially, than you may have. Buying a car, purchasing a home, or sending them to school are a few things that you may want to do for them.
Wouldn’t it be great to have an investment vehicle with guarantees that keep growing regardless of how the market is doing?
Saving in a RESP is a great idea, and if you’re already doing that, here’s how $600 a year, for 20 years will provide a big life insurance policy that they can use in their adulthood - and up to $20,000 that you can use for their post-secondary education, buying their first car or a down payment for their first home.
Here are the top 6 reason why you should invest in a Participating Whole Life Policy for your children and, you can do this all for “free”.
1. Guaranteed Cash
With a whole life insurance policy, you have the ability to choose investments. You can use the investment returns for whatever you want; to supplement education costs, purchase a home, etc.
2. Tax Exempt Benefits
The investments inside of the policy grow tax-exempt and you can also access the cash tax-exempt by leveraging a policy loan or collateral loan strategy. I will elaborate on this later.
3. Guaranteed Insurability
Insurance coverage is dependent upon many factors (including age, sex, smoking status and health). Purchasing life insurance for your child now, allows them to benefit from their youth and clean bill of health. It also enables them to have insurance for life, regardless of their circumstances as they get older.
4. Very Low Premium Payments
The cost of insurance increases with age. The younger the individual, the cheaper it is. Buying now locks in those youthful rates.
5. Protecting Yourself Against The Unimaginable
We never want to think about it, and we pray that it never happens – sometimes, the unimaginable happens. Managing the untimely death of a child is difficult, to say the least. There are final expenses and there’s time off work for grieving, some parents never go back. Having adequate protection in place will allow you to fulfill this obligation and give you the financial capacity to do what you need to do.
6. Legacy Creation
Life insurance is an effective way to build and leave a financial legacy for your children, grandchildren and your family as a whole.
Here’s an example of how a $600 annual contribution can work for you as your child grows.
A participating whole life insurance allows you to be your own bank. As you pay your insurance premiums, your policy is guaranteed to grow a cash value. Your paid premiums are pooled with other policyholders in a safe and secure account which has the potential for financial growth or dividend returns. There are three ways to access the cash value in your life insurance policy; policy withdrawal, policy loan and policy collateral loan, although I’ll touch on the policy loan and policy collateral loan a little deeper to support point 2 above.
Policy Loan Strategy
The insurance company is loaning their money, not your money. This allows for increased growth in your policy. By way of example, your policy has a cash value of $100,000 and you request a policy loan of $50,000, the insurance company will provide a loan of $50,000 of its money. Your $100,000 will remain invested in the paid premiums pool with other policyholders for financial growth and potential dividend returns.
Lastly, you do not need to qualify for this loan. There is no credit check or income check. Approval is instant.
Policy Collateral Loan
You can access your money leveraging a Third Party lender, typically a bank. The mechanics of this strategy is similar to a policy loan with the insurance company except your policy will be used as collateral with another lender. Interest rates with a third-party lender are typically less than your insurance carrier.
In conclusion, using a participating whole life policy and leveraging the loan strategies allows you access to your money tax free. Please note, in the unfortunate event of a policy holder’s death, any outstanding loan balance will be settled from the life insurance policy prior to distributing any proceeds to designated beneficiaries.
If you’re interested in seeing how this may work for you and your situation and how you can do this all for free by leveraging government funding, let’s chat and I’ll show you how.