If you need to supplement college expenses or help to pay off your McKinney, TX mortgage, taking out a loan from the cash value you’ve built up in your life insurance policy can be a smart way of handling your limited cash flow. Using the value built into your whole life insurance policy, also called cash flow banking, can be an advantageous method of financing necessities or paying off bills. If you have good financial restraint, the lack of financial restrictions on how your whole life insurance cash value can be used is a definite perk for permanent life insurance policyholders. Here are some tips from Parker Preferred Insurance to help you understand what cash flow banking is.
Life insurance is designed to protect your loved ones in the event that you die. But, whole life policies can also be helpful in other financial situations, as long as you are wise about how you use that value. For example, life insurance dividends should not be used for:
Covering a short-term cash shortfall – You may not be able to pay back your loan or continue paying the premiums and lapse on your policy.
Covering a short-term loss of income – If you become unemployed, it’s better to find a new job than rely on the cash value of your life insurance policy – but, it could be preferable to taking out a home equity on your McKinney, TX home or getting a personal loan, depending on the interest rates.
Benefits of Life Insurance Cash Value
The cash value of your whole life insurance policy is guaranteed to continue increasing over time, as long as you keep up with the premiums, and your earnings will grow as tax-deferred income as long as you live.
As a whole life policy owner, you’re eligible to receive dividends, which can be used to grow cash value or increase the size of your death benefit. By taking a loan against your cash value, you can benefit from generally more competitive rates than you’d get from a typical personal loan from a bank, making them an attractive source of cash or credit, especially when interest rates are low.
For more information about how to utilize your whole life insurance policy as a source of personal cash flow banking, contact the experts at Parker Preferred Insurance today.