Leverage Life Insurance: Maximizing Your Policy Benefits

Leveraged life insurance is a strategy for investing money and creating wealth. It involves purchasing a cash value life insurance policy that earns a dividend. You then take out a bank loan against the policy's cash value at a low interest rate. This allows investors to improve the growth of their current investments or create additional growth by investing in more permanent life insurance policies. This strategy has historically been profitable, often reaching double-digit growth potential. It can be executed by purchasing a whole life insurance policy or an indexed universal life insurance policy.

How does leveraged life insurance work?

Leveraged life insurance is a strategy for investing money and creating wealth. It involves purchasing a cash value life insurance policy that earns a dividend. You then take out a bank loan against the policy's cash value at a low interest rate. This rate is often lower than the dividend earned by the policy. By doing this, investors can improve the growth of their current investments or create additional growth by investing in more permanent life insurance policies.

This strategy can be executed by purchasing a whole life insurance policy or an indexed universal life insurance policy, with the former being the most common option. Variable universal life insurance and other variable options are typically not an option.

At its core, this strategy uses bank loans, called CVLC loans, to succeed. A CVLC, or cash value line of credit, is a common policy loan given by banks against cash value to policyholders, usually in a whole life insurance policy. It is a variable, low-interest rate loan determined with the London Interbank Offered Rate, or LIBOR. CVLC loans are safe and easy to acquire, and the low-interest rate makes them ideal for taking advantage of the opportunity to grow your money with leveraged life insurance.

Using a CVLC policy loan to leverage your permanent life insurance policy is the key to this strategy. Life insurance, more specifically cash value whole life insurance, earns a non-guaranteed annual dividend from the life insurance company. This dividend can be used to invest in wealth-building opportunities.

What are the benefits of leveraged life insurance?

Leveraged life insurance can be a useful strategy for those looking to improve their overall earnings and reduce their tax liability. The cash value of a life insurance policy can be used as leverage for a loan, and the bigger the cash value, the more money can be borrowed to invest. This can be particularly beneficial for those investing in real estate, as the additional earnings from the spread between the life cash value life insurance dividends and the bank loan rate can improve overall returns. For example, a 5% earning from real estate appreciation could be improved to 7% earnings.

Leveraged life insurance can also be beneficial for those looking to generate tax-free income at retirement. By utilising bank leverage, investors can purchase a larger amount of tax-free income, similar to using a mortgage to buy a larger home. Additionally, any interest paid on loans taken against a life insurance policy for investment purposes is tax-deductible, further improving overall earnings.

Participating Whole Life Policies offer another advantage, as they allow the policyholder to build cash value quickly by overfunding the policy within tax rules. The cash value grows through both deposited cash and dividends from the Life Insurance Company’s participating account.

Finally, leveraged life insurance provides unique benefits such as government and state protection, bankruptcy protections, and no-loss provisions, offering additional peace of mind to policyholders.

What types of life insurance can be leveraged?

Leveraged life insurance is a strategy for investing money and creating wealth with strong growth potential. It involves purchasing a cash value life insurance policy that earns a dividend. You then take out a bank loan against the policy's cash value at a low interest rate, which historically has been lower than the dividend earned by the policy. This allows investors to improve the growth of current investments or create additional growth by investing in additional permanent life insurance policies.

The most common type of life insurance used for leveraging is whole life insurance. This is because it typically comes with a built-in cash value component, which can be borrowed against. Indexed universal life insurance policies can also be used for leveraging, although variable universal life insurance and other variable options are typically not an option.

Mortgage protection insurance can also be considered a form of leveraged life insurance. This involves using existing life insurance policies to ensure a mortgage is paid off if the policyholder dies prematurely. This extra layer of protection helps clients manage their debt by aligning the policy's death benefit with the outstanding mortgage balance, preventing the financial burden from falling on their families.

How can leveraged life insurance be used for mortgage protection?

Leveraged life insurance is a strategy for investing money and creating wealth with strong growth potential. It involves purchasing a cash value life insurance policy that earns a dividend. You then take out a bank loan against the policy's cash value at a low interest rate, which historically has been lower than the dividend earned by the policy. This allows investors to improve the growth of their current investments or create additional growth by investing in more permanent life insurance policies.

Leveraged life insurance can be used for mortgage protection by ensuring that a mortgage is paid off if the policyholder dies prematurely. This extra layer of protection helps clients manage their debt by aligning the policy's death benefit with the outstanding mortgage balance, preventing the financial burden from falling on their families.

The strategy typically involves purchasing a whole life insurance policy, although indexed universal life insurance policies are also an option. Variable universal life insurance and other variable options are usually not available. The key to this strategy is using bank loans, called CVLC (cash value line of credit) loans, which are given by banks against the cash value of a whole life insurance policy. These loans are safe and easy to acquire, and the low interest rate makes them ideal for taking advantage of the opportunity to grow money with leveraged life insurance.

By leveraging against the cash value of a life insurance policy at a low interest rate, investors can improve the growth of their current investments or create additional growth by investing in additional permanent life insurance policies. This can provide an extra layer of financial security and help ensure that a mortgage is paid off in the event of the policyholder's premature death.

What are CVLC loans?

Leveraged life insurance is a non-traditional strategy for investing money and creating wealth with strong growth potential. It involves purchasing a cash value life insurance policy that earns a dividend. Investors then take out a bank loan against the policy's cash value at a low interest rate. This loan is known as a CVLC (cash value line of credit) loan.

CVLC loans are a type of policy loan given by banks against the cash value of a life insurance policy. They are typically used in whole life insurance policies, which are permanent life insurance policies that come with a built-in cash value component. This cash value earns a dividend, and the policyholder can borrow against it.

CVLC loans are safe and easy to acquire, with low interest rates. This makes them an attractive option for those looking to grow their wealth through leveraged life insurance. By taking out a CVLC loan, investors can improve the growth of their current investments or create additional growth by investing in additional permanent life insurance policies.

It is important to note that leveraged life insurance differs from other cash value life insurance strategies in its approach to growth. While other strategies rely solely on the dividend growth of a cash value policy, leveraged life insurance capitalizes on low-interest-rate loans to invest in wealth-building opportunities.

Frequently asked questions