The SMART Way to Buy Life Insurance
Premium financing lets business owners save hundreds of thousands annually on life insurance while maintaining cash flow and building tax-free retirement income.
There Is Such a Thing as a Free Lunch
Smart /smɑːt/ adjective; astute, as in business; clever or bright.
You know how the saying goes, "There is no such thing as a free lunch." I beg to differ.
Here is an example of an investor who had a paradigm shift from the status quo method of investing to an astute, bright way of funding both his life insurance as well as his passions.
The Numbers Tell the Story
Examine the facts. The chart below represents a successful business owner who, like typical business owners, had been paying a significant amount of life insurance premium. He now has $270,000 extra to spend this year.
Previous Plan: $15,000 monthly insurance expense + $15,000 monthly tax expense = $30,000 monthly or $360,000 annually.
New Plan: $3,750 monthly insurance expense + $3,750 monthly tax expense = $7,500 monthly or $90,000 annually.
Look at the annual expenses. Would you rather pay $360,000 annually or $90,000 annually for your life insurance? For the exact same amount of coverage, the current plan saves $270,000 in out-of-pocket expense. Why would you buy life insurance any other way?
Premium Financing Explained
Otherwise known as "premium financing," financing your insurance premiums allows you to grow your wealth and maintain cash flow by using a lender's money.
The savings will provide extra capital to do a number of things which require funding. First and foremost, the capital can be used to fund your passions, whatever they may be — funding your charity of choice, sending kids to college, funding your business, funding your travel plans. $270,000 per year will fund a variety of opportunities.
Cash Flow Management at Its Best
This is an example of cash flow management. Now that you see the numbers, you realize how impactful this new plan can be for your financial well-being. If the tax and cost savings aren't enough, the other reason to implement this plan is to give you a large tax-free income during retirement, as well as removing these assets from your estate.
For the entrepreneur, the cash accumulation can be utilized to fund your next venture or to purchase additional assets which will generate even more funds to work with.
Why Savvy Investors Continue to Finance
Those who don't understand the true benefits of financed life insurance worry this is a tool dependent on interest rates or policy performance. Yet even when interest rates have been high and markets have been shaky, financially savvy investors continue to invest in premium financed life insurance.
Why? Because in order for high-net-worth individuals to continue to grow and protect their wealth, they need to take advantage of leverage and actively look for investment opportunities that yield returns greater than the cost of capital. Many need life insurance to address inheritance, business, and tax issues, and they'd prefer to keep the funds they would spend on traditional life insurance premiums to utilize for additional opportunities.
A $100 Billion Industry
Life insurance has been utilized in the United States since the 1700s. It is now over a $100 billion industry. It's not an accident or a mistake that high-net-worth individuals make up the majority of this industry. Financing your life insurance is not a free lunch — premium financing is the smart way to purchase life insurance.