When whole life insurance is set up correctly and managed with care, it’s essentially a tax-free contract — with a laundry list of flexible benefits unlike anything else out there.
After all, life insurance isn’t just about providing future financial security for your family:
You can also borrow against your cash policy to take advantage of market downturns, fund your business, or just save on a car loan.
You can take advantage of critical and chronic illness riders to pay for potentially life-saving medical treatment or wipe out hospital debt (without having to sell stocks or other assets).
Or you can create a life insurance trust, planting the seed for a family dynasty that could last for centuries to come.
And trust me, the list goes on!
The more I share these different benefits with policyholders and investors, the close I get to one inevitable question:
“Isn’t this all too good to be true?”
That kind of response is only natural, too. Today’s markets are very much “buyer beware,” with truly great opportunities being few and far between. Growing your wealth these days can take a healthy dose of skepticism.
So you may be end up looking at the nearly-endless tax benefits of whole life insurance, and wondering to yourself “Really?”
Yes, really.
And the reason why it’s not all too good to be true is simple. Because on the “macro” scale nationwide, life insurance is what’s called “a social good.” It’s something that benefits our society and America at large — so the government incentivizes life insurance through tax benefits.
Remember, our government exists to serve the American people. That means ensuring our safety, health and prosperity to the best of their ability.
In order to do that, the government offers a wide variety of tax incentives to promote different behaviors. There are tax breaks for starting a family … tax breaks for owning stocks through vehicles like an IRA or 401(k) … and likewise, there are tax benefits for life insurance policyholders.
By indirectly promoting life insurance, the US government is promoting more stable patterns of wealth management and growth for Americans. They’re also promoting one of the most stable financial industries in American history, one that thrives during downturns and provides a unique buffer against the volatility of modern markets.
Near the end of his second term, President Ronald Reagan spoke before the American Council of Life Insurance — and his recorded comments provide some of the best examples of the amazing impact life insurance has on America as a country. Leave it to the Great Communicator, right?
To set the scene, his speech was recorded on November 16, 1987…
This was two years before the Berlin Wall came down, with the USSR still seemingly at full strength (thought we’d later find the empire was crumbling from within).
Reagan was on the verge of signing a critical nuclear treaty that would finally disarm Europe, but the world’s two superpowers were still on the brink of nuclear war.
He was also speaking less than a month after the infamous “Black Monday” crash that wiped out $1.71 trillion in stock market capitalization.
It was a challenging time, to say the least. Which was precisely why Reagan praised the gathered:
“You in the life insurance industry make a profession of keeping a cool head when others panic and of fixing your eye on the promises as well as the dangers of the future. Well, that's how you make the right decisions.”
He went on to highlight key economic growth factors, knowing that life insurance companies and their policyholders cared more about long-term prosperity than what the President called “financial market gyrations.”
Reagan went on to highlight how the life insurance industry’s venture capital funded the entrepreneurial boom of the 80s, with loans against cash value helping get countless American businesses off the ground.
He also praised life insurance as a key job creator, which remains true to this day. The insurance industry employs nearly 3 million Americans, with more than 10% of those working in life insurance.
Reagan even praised life insurance companies for their critical role in international relations — opening the door to South Korean insurance markets for the first time.
But the most fascinating part of this (largely forgotten) speech comes at the very end … when the President of the United States asks the life insurance industry for help:
“Yes, we live in a time of promise and a time of worry, of hazard. In the next few months, we can take steps that will lead America and the world toward a new age of prosperity and peace or, if we take the wrong steps, in just the opposite direction. So, I have a very simple appeal to you today. I need your help. I need your hand. Let's work together to make certain that the steps America does take are the right ones.”
Amazing. Almost 40 years later, and the guy’s speeches can still give you goosebumps.
Reagan could clearly see that the world was changing. America was on the verge of a generational turning point.
And he knew this turning point was bigger than the Berlin Wall … bigger than the Soviet Union or the latest market crash … and bigger than any of the other immediate challenges America would eventually overcome.
He also knew that he had just over a year left in his second presidential term. So he wouldn’t be around to help us all the way through this challenging new economic environment. He knew America would need the guiding hand of the life insurance industry to continue thriving far into the future.
His sentiment has been shared by every administration before and since then too, regardless of party affiliation or personal politics.
The life insurance business is just as important to our country’s lasting prosperity as an individual whole life insurance policy is to its policyholder. It’s just that simple.
America derives tremendous benefit from having a fundamentally conservative and value-driven financial industry guiding its citizens through the generations. That’s why authorities have made it so advantages to have your own policy.
Taxing life insurance would only make it less beneficial for America. That’s something even Washington can agree on.
Ready to see how this could apply to your wealth plan? Click the big yellow Clarity Call button and let’s map it out together.