Time now for stretching your dollar where we give you tangible
tips to help you make the most of your money.
We always want to save some money especially now.
So today we're discussing a topic that might seem morbid,
but it could actually be a huge financial lift for you and your family.
We are talking life insurance.
So there are ways to use your life insurance policy
while you are still alive to provide an emergency cash infusion
while still keeping the policy intact for your beneficiaries.
I'm joined now by Tom mcneil, Chief R A Solutions Officer at Retire one.
That's a platform for insurance Solutions.
Tom. Thanks for joining.
I think a lot of people obviously trying to get creative
in ways that they can tap emergency funds these days.
Talk to me more about permanent life insurance loans. Is it really a loan?
Uh it is a loan.
Uh In fact,
there's a lot of advantages and opportunities of permanent life insurance policy.
If you have one and there's cash value in there,
you can take a loan out and
most of the time it's gonna be a better rate than what you can get from your bank
and there's no loan application to process, it's your money.
So there's no one at the bank deciding whether or not you're gonna get the money.
If you have cash value,
it's up to you to make the decision if you want to take the loan out.
I was
never expected to pay the loan back.
Well, I was going to ask if it's, it's taxed, obviously, I think that's important,
but it sounds like it might be tax free here.
Any sort of other limitations that people need to be aware of.
Yeah, there are a few caveats.
Um so it it can have a drag on the cash value of
the policy itself because there is an interest rate usually associated with it.
It will also reduce the death benefit.
So the policy needs to be managed.
I do recommend working with uh a licensed life insurance agent.
Uh but when you do things right,
it's not taxable. Uh As long as the policy stays in force. Yeah,
so let's walk through some of the use cases here.
Obviously, emergency expenses are one tom. Are there other expenses that
withdrawing this money can be used for
sure.
Yeah,
you touched on the emergency expenses is like
unexpected illness or home or auto repairs,
time off work.
But it could be for uh more fun things like paying for a wedding or taking
a trip of a lifetime or buying that car you always dreamed of uh in retirement.
Um
uh 11 strategy that I often work on is college funding.
Uh One reason
take out permanent life insurance policy to fund
college expenses is that you're not required to use
it for college so you can change the
strategy midstream and use it for something else.
Very interesting.
Now,
when would you recommend this Tom using this option per se
versus getting a credit card or even a personal loan?
That's, that's a great question.
So, um first I, I'll tell you,
I got a call from a young adviser a few years ago who wanted to set up a,
a V U L for a client who wanted to use it for college funding.
Um I said, great, tell me more about the case. How old are the kids?
And he said 15 and 16.
And so I chuckled and said, that's probably not the right time to,
to use permanent life insurance.
Um I, I would suggest going in uh in a different direction.
This can be an effective strategy for when the kids are very young,
can be ineffective when Children are very young.
Good to know term life insurance obviously is another option, Tom.
Is that something that people can access in the same way?
Yeah.
So term is uh I,
I use the analogy of renting a house uh
versus owning a house uh with permanent life insurance.
So uh when you, when you buy a term, you're just renting the house.
Uh you don't have any equity in there. It does not build up cash value.
So loans are not available
when you have a permanent policy like whole life or universal life,
then you're owning a house and there is equity build up from which you can take a loan.
What's kind of the average time frame tom that the money needs to accrue and build
in one of these insurance policies to be enough for you
to actually tap it for use cases as we've been discussing.
Yeah, it's important to know that this is a long term strategy.
The these things have to bake for at least 15
years before you can take them out of the oven.
Ok. So that's, I think a very good note there.
Um you know,
health obviously is a big factor that's been in place when
it comes to talking about life insurance in general general,
but also medical expenses that we've seen certainly in these past few years
in the wake of COVID and just generally higher costs across the board.
Let's say you are diagnosed, for instance, with a serious illness,
can money be withdrawn to pay for something like that?
Absolutely.
So most policies come with a uh a terminal illness rider at no extra cost.
I was actually um speaking with a woman a couple
of years ago who took advantage of the situation.
She is unfortunately diagnosed with a
terminal illness and she called her life insurance agent
to make sure that her policy was paid up.
Well in talking to her agent further,
uh he found out that uh there was an experimental treatment
that wasn't covered by her health insurance plan.
But he suggested taking advantage of this terminal illness rider
where she was able to get part of the death
benefit sent to her in the form of cash and
use that cash to pay for this experimental treatment.
So she was still around 10 years later to tell me about the story.
Having that rider on her policy made all the difference in the world.
All right, Tom mcneil, chief R A solutions officer at retire one.
That's a platform for insurance solutions. Tom, very eye opening.
Thank you for joining.