Typically, insurance is considered an expense or a liability since insurance coverage such as home, auto, health or liability take money out of your pocket.

But, what if there was an insurance product that put money in your pocket?

Today, a portfolio of life insurance can serve as a separate asset class – one that allows you more financial flexibility and planning opportunities for yourself, your heirs and your charitable interests.

With the evolution of the insurance marketplace and the fact that we are living longer, healthier lives, life insurance has become more valuable as a living benefit.  One no longer needs to die to benefit.  As insurance owners grow older, a properly structured life insurance policy can provide access to the death benefit for long-term care needs or the cash value for supplemental retirement income needs.

Lending more credibility to the concept of life insurance as an asset is that major financial institutions worldwide are currently purchasing life insurance policies on individuals and packaging them into an investment pool that provides an excellent return of investment (ROI).  This is called a life insurance settlement, whereby you can sell your life insurance policy to a third party.

Life insurance is unlike any other asset you own and can provide for added investment diversification, as well as:

  • Liquidity of the Death Benefit — Since your death benefit will be paid in cash when you pass away, it’s a liquid asset that can be accessed quickly by your beneficiaries.
  • Easy Distribution — Assets can be equitably split among any number of heirs and avoid probate.
  • Predictable Value — Since some types of life insurance earn cash value on a predetermined schedule, you can confidently predict the value of your policy at a future date.  In addition, you can always determine what the ROI would be on the death benefit.
  • Stability — When life insurance is guaranteed, the value of the death benefit isn’t affected by the economy or changes in the stock market.  It’s also nice to know that many states offer creditor protection on the life policy death benefit and cash values.
  • Tax Advantages — Cash values in a life insurance policy grow tax-deferred.  Beneficiaries receive death benefits income tax free!  Estate tax free too, if properly structured!

As an investment, life insurance is in an asset class of its own.  If properly structured it can be used to achieve your family, business and charitable goals in ways no other investment product can offer.  It provides for certainty, piece of mind, tax efficiency, liquidity, a favorable ROI, and diversification.  Often times the costs incurred within a life insurance product (mortality and administration fees) can be less than an alternative investment (management and advisory fees).

Life insurance should be no different than other investment.  It should be periodically reviewed, evaluated and adjusted when necessary.

If you are interested in learning more about Life Insurance as an Asset, please contact Fahmy & Associates today at 703-760-4630.

— Ken Fahmy

CERTIFIED FINANCIAL PLANNER®, CHARTERED LIFE UNDERWRITER, CHARTERED FINANCIAL CONSULTANT