1946’s It’s a Wonderful Life is a timeless Christmas classic, featuring a legendary performance from Jimmy Stewart as the film’s lead character George Bailey.

Bailey is a young financier who finds himself roped into running the family business just as there’s a run on the bank.

He manages to stave off the bank run through sheer charm (and by emptying the funds from his own pocket). But that leaves him at the mercy of Mr. Potter, the bank’s owner and the film’s wealthy antagonist.

In a moment of desperation, Bailey reaches out to Potter for a loan to keep his bank alive and ensure the hard-earned savings of its clients. When asked about his collateral, Bailey reveals that he owns no stocks or bonds — just his life insurance policy.

This is the dramatic turning point of the movie, of course, with Mr. Potter informing Bailey that he’s “worth more dead than alive,” which leads Bailey to consider taking his own life as we see at the start of the film.

So when you think about it, one of the greatest Christmas movies of all time actually hinges on life insurance as an asset.

It’s something we take for granted after seeing the movie a dozen times.

And back in 1946, it was a totally believable premise…

Because back then, the majority of American households had some sort of life insurance coverage against their primary breadwinner. So it was perfectly believable at the time that a local financier like George Bailey wouldn’t own stocks or bonds, but would still have life insurance (albeit underfunded).

Indeed, even as investors evolved over the course of 50s, 60s, and 70s — life insurance remained a popular asset. Even as recently as 1989, the Chicago Federal Reserve estimates that 77% of all American households had some form of life insurance coverage. 37% (more than 1 in 3 families) had cash value life insurance.

Fast-forward to 2013, and that number dipped to 60% of all families having life insurance, with just 18% having cash value life insurance.

At the time of writing this (early 2025), that number has dropped even further. Now only 50% of all American households have any form of life insurance policy.

Worse still, 40% of those interviewed admitted that they rarely or never review their policies — so it’s unlikely that they’re getting the best possible benefit for their investment.

So … how does this happen?

I mean, life insurance is one of the most advantageous assets we can have as investors…

It’s essentially a tax-free contract when set up correctly, and modern life insurance policies can offer a world of advantages and opportunities — from borrowing against the cash value of your policy to protecting your net worth from estate tax.

It has a proven track record for building generational wealth, too. One generation after another has counted on life insurance as a key component of their own American Dream. All the way through the 20th century (at least into the 1990s), life insurance was quietly there, keeping things stable behind the scenes.

Ultimately, insurance has a whole world of long-term advantages for growing and maintaining your wealth … but “being exciting” just isn’t one of its attributes for most folks.

Don’t get me wrong. The moment you scratch under the surface and really start to explore what’s possible with whole life insurance, you’re going to be hooked. (You’re already well on your way just by reading this far.)

But superficially, the mere concept of “life insurance” struggles to catch folks’ attention in an age of cryptocurrency, artificial intelligence, and every other “shiny” new opportunity that’s dominating the airwaves. That learning curve can be a major barrier in today’s information age.

It’s not just about high-tech investments, either. It’s also about the larger trend towards investing in general. Through 401(k)s, IRAs and index funds. More Americans are pouring more into their investments than ever before. Right now 162 million Americans own stocks.

By contrast, life insurance isn’t technically an investment.

It’s one of the most reliable assets for growing and maintain your wealth over time, but it doesn’t fit into that simple, “five-second soundbyte” category that appeals to busy investors these days. So life insurance often becomes something they’re meaning to look into, but never move forward with.

The final barrier for many Americans today (the one I hear about most often) is the fundamental misconception about whether life insurance constitutes a cost/expense or an investment.

With term life insurance, you will pay premiums for a specific policy. If you pass away while the policy is in force, your beneficiary will receive a cash death benefit. If not, then no one receives a death benefit, and your premiums will not be refunded.

With whole life insurance, your whole life is covered. You pay fixed premiums into the policy and it builds cash value with a guaranteed death benefit for your beneficiary.

Term life insurance is typically the more affordable choice in terms of premiums, but that’s with good reason. Term life insurance companies have armies of accountants tabulating actuarial data across millions of client records. It’s not exactly a situation where “the house always wins,” but an estimated 99% of all term life policies never pay out.

So term life insurance is technically a cost/expense, much like your car insurance or health insurance (though it’s generally not a mandatory requirement, like those may be).

Meanwhile, despite premiums that are nominally higher, whole life insurance is guaranteed to pay out a tax-free death benefit.

That’s why whole life insurance is such a critical ingredient for living the American Dream…

Because it’s not just about building equity in your home, your business and your stock portfolio over time. You’re also steadily building cash value in a unique, tax-advantaged asset that can buffer your wealth from unexpected downturns and ensure lasting wealth for your beneficiaries.

That’s why life insurance has always been the key ingredient for ensuring stable prosperity through generations of successful American families.

Key Takeaways

• Life insurance historically played a crucial role in American families' financial security and wealth continuity, especially post-World War II.
• Despite its declining prevalence today, life insurance remains a unique, tax-advantaged asset that helps protect net worth and build generational wealth.
• Whole life insurance differs from term life by building cash value and guaranteeing a tax-free death benefit, making it a critical long-term wealth tool.
• Many Americans underestimate the value of life insurance, confusing it as a cost rather than an investment in risk protection and wealth preservation.
• Intentional review and proper funding of life insurance policies can provide financial stability and legacy protection that other assets may lack.

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