Business Investing: How Life Insurance Outperforms the S&P 500
Over the past 15 years, life insurance contracts have accumulated more cash than investments made in the S&P 500 portfolio.
For business owners, that should be a huge revelation.
One of the many ways to invest cash is within an indexed universal life insurance policy. ‘Universal life’ refers to a kind of life insurance that acts as an investment vehicle, wherein you add money in the form of monthly premiums, the money grows according to an interest rate, and if the holder dies before the policy matures, a death benefit is paid out to the holder’s beneficiaries.
‘Indexed’ means that the interest rate of the policy is tied to the interest rate of the stock market — but given an ‘out’ if the stock market plummets. It’s an annual reset, which allows you to return the value of your policy to its state at the beginning of the previous fiscal year, should it end the year below the value it had when the year began.
Furthermore, indexed universal life policies are tax-advantaged, meaning that you do not have to pay taxes on any of the principle when you withdraw it — you only pay taxes on withdrawn interest. Therefore, if your business has a universal life policy on its CFO, and has paid $57,000 in premiums on that policy, the business can withdraw up to $57,000 tax-free.
In short, having an indexed universal life policy on your business’ top brass gives you a vehicle that bears interest, can accept deposits, and allows withdrawals on those deposits that do not trigger taxes. At that point, the death benefit that is paid out if an accident or medical disaster occurs is almost an afterthought — but nonetheless a comforting one. The death of a top salesman or key officer can be a big shock to a business — having a bit of extra cash on hand to ride it out can be a huge boon.
Check and see what an indexed universal life policy can do for your business — it’s probably a lot more than you realize.
Please contact the Maryland life insurance experts at Balderson Insurance today to help you find the right life insurance for you and your business.