Most people purchase insurance to protect their loved ones in case of an unfortunate event, whether it is home, health, auto or disability insurance. While people buy permanent life insurance for a similar reason, you may be surprised to learn it has additional benefits. One of the most significant financial perks permanent life insurance provides is the ability to build cash value over-time.

Cash value helps clients find financial stability when they need it most and is a valuable resource that grows tax-deferred within a policy. As long as clients continue to pay their premiums, the cash value will continue to grow. Most importantly, they can borrow against the cash value while they are still alive. This is often referred to as a living benefit. (The cash value in a permanent life policy is accessed through policy loans, which accrue interest at the current rate and decrease the available death benefit and cash value.) It can supplement accumulated savings in a tax-preferred manner and help to better manage a retirement income.

A stable stream
For example, once retirement begins the order of a portfolio’s return is much more important than the average of return. If the market has down years in the early stages of retirement, a portfolio and future withdrawals could be significantly depleted. With less principal, clients earn less in returns, making it harder to maintain their income and the lifestyle to which they’ve grown accustomed to.

However, if your client has a cash reserve built up in their whole life policy, they could withdraw income from their policy instead of their portfolio in market down years. This saves principal and potential future gains. The end result can be a more stabilized retirement income stream, peace of mind, and as an added bonus, a death benefit for the ones they love.

Slideshow
Top 10 large-group life insurance carriers in the U.S.
Revealed in descending order, the listing is based on Form 5500 Schedule A reporting data on premiums as of Dec. 31, 2015.

While this market can be difficult to navigate, cash value from a permanent life insurance policy can help to better navigate the vicissitudes of retirement planning and variable market conditions.

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Ari Fischman

Ari Fischman

Fischman, CFP, is a Registered Representative offering securities through NYLIFE Securities LLC, Member FINRA/SIPC.