So you are still pondering whether to purchase a whole life policy to start implementing the Infinite Banking Concept or not even though it is more costly compared to term life insurance. In this article, we are sharing the key reasons why you need to have whole life insurance.

A whole life insurance policy covers you for your entire lifetime. In case you have a stable disposable income that you would wish to invest in various ways, it can act as financial protection for your loved ones as well as a saving strategy with little risks or you can utilize it as an investment vehicle as long as you live a lifestyle of “Becoming Your Own Banker“.

This is how whole life insurance operates. When you pay premiums, in exchange, the insurance carrier pays out death benefit tax-free to your beneficiaries when you pass away. The majority of whole life insurance policies have a savings component called cash value. You can take advantage of the financial benefits of cash value throughout your life by practicing the Infinite Banking Concept. As stated in our previous articles, IBC allows you to borrow cash from your whole life insurance policy and use the policy’s cash value as collateral.

A whole life insurance policy is usually the most unpopular among life insurance types. The majority of people opt for term life insurance because they believe that it’s simple and affordable. However, there are various circumstances that require you to go for whole life insurance to get value for your cash.

Circumstances Where Life Insurance is a Better Option For You

The following are some circumstances when you need whole life insurance rather than term life insurance.

1. You’re a wealthy person with a sizable estate.

You must pay the federal estate tax when you pass away if your estate is worth more than $12.06 million for an individual or $24.12 million for a married couple. Most likely, the tax rate will be 40%. Washington D.C. and certain states have smaller exemption amounts.

Estate taxes take a huge portion of what you need to pass over to your loved ones when you pass away. You can create a whole life insurance policy that can be used to pay the estate taxes after you pass away rather than leaving it up to your loved ones to pay them out of pocket.

Apart from financing estate taxes, people with high net worth can utilize a whole life insurance policy to pass over wealth without raising their taxable estate. To put it another way, your whole life insurance benefit can be passed over to your dependents tax-free and without the added hassle or complexity of probate or other laws.

2. You have maxed out other accounts while investing for retirement.

A whole life insurance policy can also help wealthy individuals who have reached their retirement savings maximum due to 401(k) and IRA income restrictions.

Never use whole life insurance as your main method of retirement planning. But if you’ve exhausted all other choices, it can support a strong retirement plan. Whole life insurance is a low-risk alternative to growing your funds and accumulating tax-deferred growth.

The cash value of a whole life insurance policy increases gradually over time, though often at a slower rate compared to stock market investments or mutual funds. The lower interest rates (returns) could be perceived as a drawback. But compared to cash investments for your 401(k) or other retirement funds, they may be highly stable as well as less volatile.

In case you retire and the market is at its low, borrowing cash against your cash value can be the best alternative.

3. You’re a parent purchasing life insurance for your kids

Parents having a lot of disposable cash may want to consider getting whole life insurance for their children. It’s a similar concept to starting a Roth IRA for your children while they are still young or making any other investment. There will be more time for a whole life insurance policy with a cash value component to compound.

For young people, whole life insurance is like a financial start. The policy and any collected cash can be transferred by the parents to the child when they are eventually financially independent.

Time and financial savings are two key advantages of purchasing whole life insurance for your child. Although a whole life insurance policy’s cash value can take a while to build up (up to 10 years or more in some cases), by getting life insurance for your children when they are younger, you are buying them more time.

Compared to a policy bought later in life, the insurance will have accumulated interest by the time they leave school. When the cash value increases, your child may borrow money from the policy. Or they can surrender the policy for cash if they no longer need it or utilize the reserves to pay the premiums.

The cost of life insurance increases with age. Therefore buying life insurance later in life is an afterthought. When you purchase life insurance for a young kid, the cost of a permanent policy is cheaper. It won’t increase in cost over time.

4. You provide for a lifelong dependent

Because life insurance has no expiration date, it can be a fantastic choice if you provide long-term financial support for an elderly parent, an adult, or a disabled child. Around 15% of people worldwide are disabled in some way.

You can make sure your loved one has the assistance they require by designating your dependent, a trust, or another caregiver as the beneficiary. If your dependent is incapable of handling their own finances, it is better to choose a trust or caregiver as the beneficiary of your life insurance policy.

5. You own a business that has a buy-sell agreement.

A buy-sell agreement may be financed with a life insurance policy. This eliminates the need for out-of-pocket funds and enables the remaining business partners or stakeholders (including surviving family members unattached to the business functions) to use the death benefit to buy remaining shares after the insured’s passing.

It can be challenging to understand this kind of policy. It should be put up in collaboration with your licensed life insurance agent and a qualified financial planner.

6. You’re a disabled adult

Adults with a disability or illness that is likely to get worse with age may consider a whole life policy as another viable choice. This is particularly true if you expect to have financial responsibilities well after retirement. Regardless of complex medical requirements, life insurance guarantees lifetime protection and consistent premiums.

A whole life insurance coverage may be essential if you have a kid with a major disability or are expecting one. Some kids need care for the rest of their lives, which can be quite expensive.

7. You desire life insurance that is perpetual

For those who like to set their financial plans in motion and then forget about them, life insurance is fantastic. Additionally, it spares people from the anxiety of having to undergo medical testing and underwriting at an advanced age. You can also establish practical, automatic premiums so you never forget to pay.

If you have a term life insurance policy, you need to keep track of when your coverage should expire. To maintain your health rating, you can always switch your term life insurance to a whole life insurance policy. But it’s simply another process you have to go through.

Benefits of Life Insurance in Infinite Banking Canada

Life insurance has additional benefits that you cannot enjoy with term life policies. Here are the top three benefits you can enjoy with a life insurance policy:

• Lifetime protection

A primary advantage of a life insurance policy is that it’s permanent. You get lifetime coverage protection with constant premiums, do not expire after a certain number of years, and cannot be terminated due to illness or health issues. However, you are required to pay premiums on time to keep the policy alive.

• Cash value

Life insurance comes with a cash value portion that grows over time, and it’s among the major benefits of being a life insurance policyholder. Whole-life policy owners can borrow against the policy’s cash value for any kind of need that arises. However, if you pass away unexpectedly with an outstanding loan balance, the balance is deducted from the death benefit. Meaning that your beneficiaries will get your death benefit less outstanding loans.

• Flexibility

Owning a life insurance policy offers you some flexibility. Since it accumulates cash value over time, the cash value can be utilized for various reasons. You can also decide not to touch it and allow your policy’s cash value to grow over time.

Final Thoughts on Whole Life Insurance in Infinite Banking Canada

The best time to get a life insurance policy is when you’re still young with extra disposable income and the best health rating which will lock you at the lowest premium for life. This is age is probably around 30.

If you get life insurance during this period, after about 15 years the cash value would have witnessed tremendous growth. Additionally, you will not have the need to look for another insurance policy, since this is permanent.

When you finally get children and you start thinking about estate planning, your whole life insurance would have accumulated a huge cash value. You can save consistently and invest the difference between what you would have paid as premiums in term life insurance and whole life insurance. You can invest in your kids’ 529 plans and the remaining in real estate.

Even though many people view a term life insurance policy as the best option, there are particularly several good reasons why you should also think about purchasing a life insurance policy.

In case you own a term life insurance policy, there is still the option to convert it to a whole life insurance policy. Through that, you find a way of maintaining your initial health rate status, which will help you acquire relatively low premiums.