.png)
BetterWealth
January 5, 2026
Many people exploring using life insurance as an investment strategy are trying to solve the same problem: they want growth and flexibility, but they’re tired of market whiplash, hidden fees, and accounts that punish early access.
At BetterWealth, we focus on helping you understand how permanent life insurance can build cash value you can use while you’re alive, with potential tax advantages and a built-in layer of protection.
In this guide, you’ll learn how cash value works, which policy types are commonly used, the real benefits and tradeoffs, and how to decide if this strategy fits your goals and timeline.
Looking at life insurance as part of your investment strategy means thinking past just protection. It’s about knowing how different policies build cash value and how that can help you reach your long-term goals.
Understanding the basics makes it easier to decide what works for you.
Life insurance investing is using certain policies to build and protect wealth. Unlike term life, which is just a payout if you die, investment-oriented policies mix coverage with cash value growth. This cash value grows tax-deferred, and you can tap into it while you’re alive.
The goal? Create a tool that offers both protection and a real chance for growth. You can borrow against your cash value or use it to supplement retirement income.
If you’re looking for a low-risk way to grow funds, with tax perks and estate protection, this might be up your alley.
Here are the main kinds of life insurance people use for investing:
Whole life is a favorite for slow-and-steady growth. IUL suits folks who want a shot at higher returns but still want some safety net. We usually lean toward whole life for its predictability, especially when it’s overfunded to boost cash value.
Cash value is the savings chunk inside permanent life insurance. Every premium you pay partly goes to the death benefit and partly to this cash stash. Depending on your policy, it grows through interest, dividends, or market gains.
You can use your cash value in a few ways: loans, covering premiums, or bumping up your retirement income. And the tax advantages? As long as your policy’s active, you don’t get taxed on that growth.
It’s a bit like having your own bank. You can access funds without selling off investments. That kind of flexibility is pretty handy for intentional wealth building.
Adding life insurance to your financial plan can help you grow your money and offer protection. You get access to cash when you need it, and your family’s financial future gets a safety net.
These perks give you more control and flexibility as you build wealth.
One of the biggest perks of investing in permanent life insurance is tax-deferred growth. The cash value inside your policy grows tax-free each year, so your money compounds faster than in taxable accounts.
You only pay taxes on the growth if you withdraw cash. And if you use loans against your policy’s cash value, those can be tax-free too, if you play your cards right. That combo of safety and tax perks is honestly tough to beat for safe, steady growth.
As you pay premiums, some of that money builds up as cash value. You can borrow or withdraw it for emergencies, investments, or opportunities, with no need to sell assets or get a credit check.
You get to decide when and how to use your cash value. Some folks treat it like their own personal bank, which is why strategies like Infinite Banking exist.
Just remember: borrowing reduces the death benefit, and you’ll need to pay it back to avoid extra costs. Still, this flexibility sets it apart from investments that lock up your cash.
Life insurance guarantees a death benefit for your beneficiaries, and it’s usually tax-free. That means your loved ones have financial support if something happens to you, helping with living expenses, debts, or leaving a legacy.
This protection matters for families, business owners, or anyone with people who depend on them. Combine that with cash value growth, and you’ve got a policy that works double-duty: building wealth now and protecting your family later.
Trying to figure out where to put your money? It helps to know how life insurance compares to things like mutual funds or retirement accounts.
Every option grows your assets differently, and the risks and benefits aren’t the same.
Mutual funds pool money from lots of investors to buy stocks and bonds. They can bring in higher returns, but you’re exposed to market swings. Sometimes you win, sometimes you lose. And those management fees can nibble away at your gains.
Life insurance, especially whole life policies, combines protection with cash value growth. The cash value grows at a guaranteed rate, so it’s less risky. Plus, you get tax perks and can take loans against your policy without taxes.
Here’s a quick comparison:
Feature
Mutual Funds
Whole Life Insurance
Risk
Market risk, no guarantees
Steady growth, guaranteed minimum
Fees
Management fees, expenses
Higher premiums, but low fees after funding
Tax Benefits
Taxable on gains
Tax-deferred growth and potentially tax-free loans
Access to Funds
Can sell anytime
Loans/withdrawals, but reduces policy value
If you’re after steady growth with insurance protection, life insurance can actually work nicely alongside mutual funds.
401(k)s and IRAs offer tax advantages and help you save for retirement. They let your money grow, but withdrawals can get taxed or penalized if you take them early.
Whole life insurance adds something extra: it builds cash value you can access without penalties. That makes it a flexible tool for retirement income or emergencies. And your beneficiaries get a death benefit, which retirement accounts just don’t provide directly.
A few key differences:
Using life insurance in your retirement mix gives you more options as life changes. We look at all these factors to help you balance growth, safety, and flexibility.
Not all life insurance is created equal when it comes to investing. Some policies offer better long-term value through cash growth and stable coverage. Knowing the main types helps you figure out what fits you.
Whole life insurance gives you permanent coverage and a steady cash value that grows on a set schedule. Fixed premiums mean you always know what’s coming.
Your cash value grows tax-deferred, and you can borrow against it for whatever comes up, without losing coverage. A lot of folks like whole life because it’s secure and predictable.
Whole life is a solid choice if you want a predictable, long-term plan that blends protection with wealth-building. The guaranteed growth and any dividends just add to its appeal.
Universal life insurance also covers you for life, but with more wiggle room on premiums and death benefits. The cash value grows based on interest, which can change with the market or how the insurer is doing.
You can adjust payments if your budget shifts or your goals change. It’s more adaptable, but growth isn’t as predictable as whole life, so you’ll want to keep an eye on it.
Universal life works if you want to balance lifetime coverage with flexible investment options. It’s not as steady as whole life, but it lets you tweak your policy as life happens.
If you want to use life insurance in your investment plan, you’ll need clear goals and a sense of how much you’ll contribute each year.
The key is making sure your policy fits your financial needs and helps your wealth grow at a pace you’re happy with.
Start by getting specific about what you want life insurance to do for you. Are you hoping for extra income in retirement, a way to build cash value, or just more protection for your family?
Your goals will help you pick the right policy and strategy.
Say you want steady growth and low risk. A whole life policy with guaranteed cash value might be just right. If you’re after a little more growth and don’t mind some ups and downs, indexed universal life could be a better fit.
Write down your timeline and what you want to achieve, like how much extra income you want at retirement, or how much cash value you’d like to have on hand for emergencies or investments.
How much you pay in premiums really matters. Permanent life insurance lets you pay more than the minimum to build cash value faster. This overfunding strategy helps your policy grow more quickly.
Pick a premium amount that fits your budget and your goals. If you pay too little, growth drags. Too much, and you might shortchange other investments.
Check in on your contributions regularly to keep things balanced.
A simple table helps:
Premium Amount
Cash Value Growth
Flexibility
Risk Level
Minimum
Slow
High
Low
Moderate
Steady
Moderate
Moderate
Overfunded
Faster
Lower
Moderate
Using life insurance to invest isn’t without important factors to think about. You’ll need to consider costs, how borrowing from your policy might affect things, and what happens if you cancel early. These details can really impact your long-term financial picture.
Life insurance policies, especially permanent ones like whole life, tend to come with higher fees than your usual investments. You’re looking at costs like administrative fees, mortality charges, and sometimes commissions.
These fees eat into your policy’s cash value growth. For example:
Always compare these fees with other options. Check how much of your premium actually goes toward building cash value. If fees are high, it could take a while before you see a decent return.
A big perk of permanent life insurance is the ability to borrow from the cash value. But policy loans aren’t free money. They come with some real risks if you’re not careful.
When you take a loan, interest starts piling up. If you don’t pay it back, your death benefit and cash value shrink. That means less protection for your family.
Also, the money you borrow isn’t earning interest inside the policy anymore, so growth slows down. Miss too many loan payments and your policy could lapse, which means you lose coverage and might owe taxes.
If you use loans, keep track and make repayments a priority to keep your investment and your coverage safe.
Cancel your policy early, and you’ll likely face surrender charges. These fees help the insurer cover its costs, especially in the first years.
Surrender charges can really cut into your cash value if you exit too soon. Some policies have surrender fees that drop each year but can stick around for a decade or more.
Knowing the schedule for these charges is key. Nobody likes surprises. If you think you’ll need your money soon, read the fine print.
Using life insurance to invest isn’t something to rush into. You’ve got to think about your finances, your goals, and how much risk you’re comfortable with.
Not everyone will benefit from this strategy, and honestly, there are a lot of common mistakes people make before they even get started.
If you’ve got a long-term mindset and you’re after steady growth with some tax perks, this could be a fit. Entrepreneurs, investors, and families looking to protect and grow their wealth often find overfunded whole life policies useful.
This approach tends to make sense if you:
If you need quick access to cash or want fast, high growth, this probably isn’t the right fit. Life insurance investing moves more slowly than stocks or real estate.
A lot of people think life insurance is just about the death benefit. Actually, many policies build cash value that you can use while you’re alive. That cash value grows tax-deferred, and you can borrow against it without much hassle.
It’s also a mistake to think permanent life insurance guarantees big returns. The growth is steady, not flashy. Overfunded whole life policies focus on safety and dividend potential, not chasing the market.
Some folks mix up term insurance with investing. The term is just for coverage over a set period and has zero cash value, so it’s not an investment.
If you get these basics, you’ll start to see life insurance as both protection and a financial tool, if it fits your plans.
Picking a life insurance policy and provider isn’t just about numbers. It’s about finding stability and asking good questions. You want a policy that’ll last, grow cash value, and match your financial goals.
When you’re picking an insurer, check out their financial ratings from independent rating agencies. These ratings show how likely the company is to pay claims and support your policy’s cash value growth.
Look at how long the insurer’s been around. Companies with decades under their belt tend to be more reliable. Take a peek at their claim-paying history. Do they pay promptly and fairly? You want a provider with a solid track record, strong reserves, and clear policies. That way, you avoid surprises and protect your investment for the long haul.
Ask your advisor how they pick policies for your specific needs, whether you’re building wealth, planning your estate, or just want protection.
Ask about fees, premium flexibility, and how cash value grows. Be clear on any penalties or restrictions if you need to access your money.
Don’t forget to ask about dividends and how the insurer handles them. Good answers help you compare your options.
Using life insurance as an investment strategy can help solve a common frustration: growing money while still keeping it accessible and protected. When structured properly, it adds stability, tax advantages, and flexibility to your overall plan.
At BetterWealth, the focus is on helping you understand how cash value life insurance fits alongside your other assets, not replacing them. The goal is intentional design, so your money works for you in multiple ways instead of being locked away.
If you’re unsure whether this strategy fits your situation, schedule a free Clarity Call. You’ll get clarity on your options and a clear next step forward, without pressure or guesswork.
Whole life insurance builds cash value over time, and you can borrow against or withdraw from it. This cash grows steadily and is generally guaranteed. But whole life insurance is pricier than term, and the returns are usually lower than what you might get from riskier investments. It’s not for everyone.
A permanent life insurance policy gives you a steady, predictable asset with tax perks. It can help balance out riskier stuff like stocks or bonds. Since it builds cash value, it can double as an emergency fund or a source of loans, making your portfolio more flexible.
The cash value in your policy grows tax-deferred, so you don’t pay taxes on gains every year. If you structure things right, loans or withdrawals can be tax-free. The death benefit usually gets paid out tax-free to your beneficiaries. That’s a big plus for wealth transfer and estate planning.
Check the policy’s fees, how fast cash value grows, and how easy it is to withdraw or borrow. Compare guaranteed minimums and possible dividends. Make sure premiums fit your budget for the long haul. It’s smart to talk through your goals with a financial planner before making a choice.
Younger folks might focus on protection and lower premiums with term or simple whole life. As you get older, adding more cash value and riders can help you build wealth and plan your estate.
Retirees often use policies for tax-free income or to protect assets for heirs. Your strategy should shift as your income and needs change.
Policy fees and commissions can eat into your returns, especially in the early years. Honestly, the cash value might not grow as much as you’d hope compared to other investments out there.
If you take out loans or withdrawals the wrong way, you might shrink your death benefit or even trigger taxes. You really need to stay on top of the policy terms and make sure you keep up with payments, or you could end up losing your coverage altogether.
.svg){kind=logo}
