Beyond Protection: Can Life Insurance Be a Wealth-Building Strategy?
March 25, 2025
Is it possible to use life insurance to build wealth? The answer is yes! Beyond its traditional role of providing payouts to your chosen beneficiaries, life insurance can be a tool to boost your savings.
Versatility is one of the many reasons to consider making life insurance a component of an integrated financial strategy. While life insurance promotes the financial security of beneficiaries in the event of the policyholder’s death, it also functions as a fantastic tool for wealth-building and financial planning. Here’s why.
The Basics of Life Insurance as a Financial Tool
Certain types of life insurance policies, such as whole life, feature a cash value component that lets you accumulate cash value over time. The policy is structured to allow you to access your policy’s cash value through loans or withdrawals. This feature works in your favor because you can borrow against the policy and use the cash value to meet your evolving financial needs.
Cash Value Component of Whole Life Insurance
The whole life insurance policies we sell at 1891 Financial Life include a cash value component. A portion of your premium contributes to the cash value, while the rest covers your life insurance protection.
The growth of the cash value is based on a dividend rate declared by the insurance company, which is influenced by its financial performance. As a policyholder, you can make the decision to reinvest your dividends, take them as cash, use them to pay your premiums, or even purchase additional coverage.
Strategic Uses of Cash Value in Life Insurance
There may be circumstances in which you wish to borrow against the cash value of your life insurance policy. In these cases, you can use your policy’s cash value to cover expenses related to education, emergencies, mortgages, and investment opportunities. It’s also possible to use your policy’s cash value to supplement your retirement income.
Tax Advantages of Life Insurance
Tax-deferred growth is one of the biggest benefits of a life insurance policy. As the policy’s cash value component grows, you can avoid current income tax implications. The funds will compound without being taxed, which maximizes the policy’s cash value over time.
Considerations and Risks
As with any financial investment, there are potential downsides and risks to consider before making your decision. When it comes to life insurance policies, you’ll want to be aware of the possibility of paying high premiums and fees related to managing the investments, as these can reduce the overall growth of your policy's cash value.
At 1891 Financial Life, we urge you to be cautious about the risks involved with policies tied to investments. In particular, variable life insurance policies depend on market performance for their cash value component.
Building Wealth
Life insurance is more than just a death benefit. It’s a tool for building generational wealth and promoting your financial stability. If you’re interested in challenging your perceptions of life insurance and exploring its potential as a multifaceted financial tool, set up a meeting with an 1891 life insurance specialist to discuss how different policies can fit into your individual financial strategy and long-term goals.
About 1891 Financial Life
Our culture is about looking out — for you, for others, for family, for the community. That is how we go “Beyond Life Insurance.”
At 1891 Financial Life, we don’t just sell policies, we offer possibilities. We pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs. In 2023, 1891 Financial Life was listed by Forbes as one of "The World's Best Life Insurance Companies."
Our portfolio is extensive, ranging from various life insurance policies to our annuities to support your financial needs no matter what stage of life you’re in.