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
alone? 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. Uh Tom Very eye opening
. Thank you for joining.