You are likely NOT in the market for additional “life insurance”. As the saying goes, we’ve “been there, done that”. Our family’s primary “bread-winner” status is over, so any need for more “life insurance” is now behind us. But we could very well be in the market for more “cash value” because it’s primarily the “cash value” part of “cash value life insurance” that can give us valuable access to the Tax-Free Bucket.

Its value stems from (1) its unique and protected tax status, (2) its competitive, predictable and protected returns, (3) its tax-free means for distributing income, and (4) its tax-free leverage provided by the death benefit. The seemingly wide lack of understanding about it is because it is usually thought of as an “expense”, instead of as an asset, and a transferrable one, too.

Most of us have always viewed life insurance from the perspective of the death benefit, with the objective having been to provide the most amount of death benefit we need for the least amount of premium we can get away with. That’s the “expense” view of life insurance – an “inside the box” perspective. And it usually results in the purchase of term insurance.

But, when we view cash value life insurance as a tax-advantaged “asset class”, our objective is to pay the most amount of premium we can afford and is permitted by the insurance company for the least amount of death benefit required. The amount of death benefit becomes totally secondary. Instead we are leveraging the product’s unique cash accumulation and distribution structure to shelter as much as we can from taxation.

Now we focus in on the asset class characteristics:

• Tax preferred

• High credit ratings

• No age restrictions

• Few “contribution” limits

• Upside only growth, no downside risk

• Competitive returns

• Tax-free liquidity of cash accumulation

• Protection from creditors (depending on state laws)