Money Expert Q&A: Replenish Savings with Life Insurance

Insider tips on how to build and manage wealth

Gail Marquis says life insurance is not just for survivors of the deceased.

When most people think of life insurance, they typically see it as a way to be sure that their loved ones are taken care of in case of their death. This type of insurance can cover funeral expenses, help settle debt left behind, and supplement the everyday living expenses of beneficiaries, including children and spouses.

Gail Marquis, vice president and financial adviser at Element Financial Group, says life insurance can also be viewed as an asset to your retirement and other savings portfolios.

Q: How can life insurance be used to replenish savings and retirement reserves?

Marquis: The idea around life insurance is that it is only for when a person is dead. With my clients and myself, I use life insurance almost as a bond portfolio. In doing that, I am able to replenish my retirement [and other] savings.

Use life insurance to supplement retirement income and grow your retirement reserves. Deal with whole life products by mutual companies that are not beholden to their shareholders but owned by the policy holders. That way, when dividends are paid, they are paid directly to the policy holders. Not in the form of a check but in the form of reserves that go to your holdings. The value of the policy might be higher and the premiums might be higher, but there is a sense of flexibility around it. You can protect your principal. It is conservative but it is a fixed rate. You don’t see the fluctuation in a life insurance portfolio that you see in the stock market. The dividend is lower than the stock market but it is guaranteed. Plus, there is the added benefit of the actual life insurance.

Further reading: How to Calculate Your Life Insurance Needs

ACROSS THE WEB
  • Kathy

    Would like to purchase life insurance, but it’s expensive for us, esp. since we’re older (I’m 48 & my husband is 55) & my husband has a pre-existing condition (Type 2 Diabetes). We were turned down by 3 companies & also other quoted high prices for term insurance.

  • Clifton

    Good morning Gail,purchasing life insurance as an asset or any saving portfolio is a very bad idea. Whole life or Cash value insurance as you stated cost more and will offer a low rate of retun for your money 3% to 5%.These policies sound like a very good idea but when you look closely you”ll find many other charges attached in your policy and in the first few years you have a whopping $0 in your saving plan. If you want to take money out of your saving the company require you to borrow YOUR OWN MONEY and then pay it back with intrest and if you fail to pay it back (your money remember?) they will deduct it out of your face amount of your policy!! Term insurance on the other hand cost much less and you get 2 to 3 times more coverage!! My company we educate our clients to buy Term and invest the difference,in your policy Gail look at the amount of money you would have in 20yrs (can you live off that amount?) We compare apples to apples people DO NOT need life insurance there whole life.My company set up our clients in seperate savings plans from there life insurance policy (Avg 10% to 12% in there portfolio) the money your money makes can replace your insurance policy if thats what you desire and you can have a comfortable retirement with 10x the amount of saving than in a whole life policy and you have full control of your money you don’t borrow the saving if needed it’s yours to do as you please

    • Nic

      Clifton, in theory this sounds good, buy term and invest the difference! A few things to consider. First, how many people, actually get around to investing the difference? How many guarantees does the stock market offer? How long will you need your life insurance? Only about 2% of term policies payout a death benefit, meaning most term policies are not in force when needed by policyholders. Most people find the policy to expensive when they really need the coverage, during the latter parts of their lives, if they have outlived term policies purchased during the earlier years of their lives. Finally, consider these points about the advantages whole life or permanent life insurance, cash grows tax deferred, and can be withdrawn tax free. In most states, cash from creditors (i.e. law suits, predators). You will probably get greater returns from investments in the stock market, but that depends on your risk tolerance. However, what guarantees, safety, and protection do you have for these funds. Balance is key, a strong foundation has a combination of insurance (term and whole), savings, and investments. TAKE CARE OF THE BASICS, FIRST!

  • Jane Eyre

    I couldn’t agree more with Clifton. Using life insurance as some kind of investment is not recommended by most financial advisors and is roundly condemned by Dave Ramsey. You never need to buy whole life/cash value life insurance. Keep your life insurance and investments separate. This is such a bad idea. Don’t fall for it!

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