You’ve thought about securing your legacy and understanding the benefits of life insurance for your loved one. Have you thought about leverage yet?
Use Financial Leverage
Leverage gives you a mechanical advantage you couldn’t achieve on your own. Just like leverage in physics can help us push or pull on something, leverage in finance helps us achieve extra force to grow our assets in a way that exceeds what we can do alone.
Insurance is a form of leverage.
You are leveraging hundreds, thousands, or even millions of dollars that aren’t yours in exchange for a monthly premium to protect you and your family from devastating risks. Fires, tornadoes, hurricanes, theft, violence, disability, accidents, and death are just a few of the risks mitigated by using insurance. But only one of those risks is guaranteed to happen.
Unlike all other kinds of insurance, there is a 100% chance you will die. You may or may not have an auto accident, your house may or may not burn down, and you may or may not get abducted by aliens (UFO insurance really exists), but there is a 100% chance that you will die.
The only insurable event that is guaranteed to happen is your death. How much more powerfully could you show up to your life if you decided to leverage your death?
The Non-Leveraged Death
Detractors of permanent insurance products argue that if you save diligently over a lifetime and earn an unbroken 8% rate or return with zero down years, you can become “self-insured.” When you reach a glorious 62 to 67 years old, you can gleefully watch your 30-year term insurance expire while feeling confident about having zero death benefit protection.
Now, you can “afford to die.”
Since you’ve “bought term and invested the difference,” you’ve accumulated enough money to retire to your chosen locale, sip fruity drinks, and enjoy huge dividends until you pass away. This rosy picture sounds excellent, provided you live a long and prosperous life.
But accidents happen on unremarkable Tuesday mornings. Things we least expect can present themselves in the snap of a finger, and our lives can change in the blink of an eye. If this happens, that nest egg you planned to build hasn’t accumulated yet, that house you live in still has a large mortgage, that college graduate you paid for still lives in your basement, and so on.
In this case, your life wasn’t insured, and your family has to make sense of your financial mess.
The Leveraged Death
In this scenario, let’s make some of the same assumptions.
You have diligently invested your entire professional career while simultaneously funding premiums into a permanent insurance product. By the time you reach 62 to 67 years old, you have accumulated enough money to retire to your chosen locale, sip fruity drinks, and enjoy huge dividends until you pass away.
And, best yet, you can spend your nest egg down to nothing because you know when you die, the financial legacy you leave to your beneficiaries can be your death benefit from your permanent insurance policy. Best yet, this is paid through a lump sum check to your beneficiaries and skips the soul-crushing process of probate court.
But, as we acknowledged earlier, accidents happen on unremarkable Tuesday mornings. Things we least expect can present themselves in the snap of a finger, and our lives can change in the blink of an eye. Insurance, as a whole, mitigates risks no single person can manage.
In this case, your life was insured! This means your family gets a lump sum check for the amount of your death benefit. They can grieve without suffering additional financial deprivation. After all–no one can ever replace you, but you can make preparations for someone else to replace your income.
Life Insurance Helps You Leverage a Legacy
Merriam-Webster defines a “legacy” as “something transmitted by or received from an ancestor or predecessor, especially money or other personal property.” What will you leave behind you when you’re gone?
Life insurance guarantees your beneficiaries a lump sum, ensuring your influence will be felt beyond the grave. This money can address whatever injustices (social, environmental, legal, etc) you care about most profoundly or plan a more financially secure future for your direct beneficiaries. To be even more specific, your life insurance proceeds can filter through a trust so that no matter what, your wishes for those dollars are still honored! More on that later…
The three main kinds of legacies you can leave are:
- Financial Legacy
- Spiritual Legacy
- Emotional Legacy
While the financial legacy is the most prominent legacy most people plan to leave behind, the other two legacies should also be considered. Life insurance can make meaningful strides toward leveraging all three of these legacies.
Financial Legacy
Financial legacies include money, property, tangible assets, intellectual property, royalties, etc–anything with marketable value.
In the short term, the financial legacy you leave behind can be felt by allowing your family to grieve your absence without co-experiencing financial deprivation. In the long term, the assets you leave behind can prepare your family to experience the power of steadfast generational wealth.
Much like the Rockefellers used life insurance to protect their family’s wealth, you can too. If you want to put your life insurance policy inside a trust to fund it, you can write instructions for the trust to buy life insurance for your children and grandchildren in the future. You could write into the trust instructions that your kids and grandkids could use the cash value of their policies to finance a business project or germinate their aspirations of entrepreneurship.
In doing so, you could build a wealth-building engine that truly outlives you.
Spiritual Legacy
Spiritual legacies include how you worship, what you believe, and why you choose to live with purpose. A financial aspect of a spiritual legacy could be your attitudes towards and practice of generosity, altruism, and giving.
Your spirituality is essential to your identity and/or the family identity you’ve created. Leaving behind a values-driven family culture ensures that your faith impacts your direct descendants and many more.
No one can replace the spiritual influence you have on your family. But, one way to make this transition as smooth as possible is to leave a financial legacy to cement a spiritual legacy. Just imagine what it would be like if you left behind enough money to fund all your local church’s operating expenses for a few years or single-handedly funded all your children to take a gap-year mission trip.
What if you had created a family foundation before you died and funded all or part of the death benefit into the foundation? Then, your family could continue living out your mission of charitable giving even after your death.
Emotional Legacy
Emotional legacies refer to the familial sense of security and stability nurtured in a loving environment. Whatever traditions you have that bring you together as a family is part of your emotional legacy. Anything that involves fun and play is included in this category.
Whether your family bonds over sporting events or hiking in the backcountry, it’s vital that your family can come together in ways that are familiar to them as they grieve your death. The ability to purchase things like season tickets or food for an extended hike gives your family a sense of emotional security and stability even in your absence.
Just because it’s fun doesn’t mean it’s less valuable than something serious. Recreation is important in families because it creates lifelong memories, cements the bonds of love, improves social skills, sparks new hobbies, and develops empathy.
Whatever tools you leave behind to allow your family to maintain a sense of security and stability will be one more tool they can use to survive the inevitable storms of life that threaten to sweep them off their feet.
Let Us Help Leverage Your Legacy
Life insurance can help mitigate risks that are too significant for one person to manage alone. There is no risk quite as certain as dying–seemingly far off but also incredibly near at the same time.
If you have in mind a financial, spiritual, and emotional legacy that you want to leave behind, we have one question left to ask you: If you died today, could you guarantee it? Or would your wishes be left to the dustbin of history?
If you can’t guarantee it, consider allowing us to help leverage your legacy through properly structured whole-life insurance. We’d be honored to receive your request. If you’ll let us help, schedule a clarity call with one of our wealth coaches.
