How to Use Whole Life Insurance to Maximize Your Investments with living room scene
How To Use Whole Life Insurance To Maximize Your Investments
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    In 2016 I found myself in a position to cash out of our last California property after a nice equity run between 2009 and 2016. We were considering moving on up and purchasing a primary home in San Francisco and were moving through the loan process to buy a $2m home. 

    One day as I sat there at my desk sending the lender the documents required to get the loan to buy the home, I realized that I would be sitting at that desk (or some other desk at another job) for the next 30 years working to pay off this home. 

    Needless to say this never happened. We pulled out the loan and decided to rethink our path to building wealth. I wanted one that would serve me today and tomorrow, not just tomorrow. After all, tomorrow is never guaranteed. But as my mom always used to say, you have to live for today but prepare for tomorrow. 

    I was on a mission to understand just how to go about doing this. Most times when we have a dollar, we can EITHER spend it OR save it, but you can’t do both. Similarly, in my mind, I thought you can have your money either serve you today OR tomorrow, but you can’t do both at the same time. 

    That’s when I stumbled upon whole life insurance policies. Now, I know many of you might be thinking about all of the negative stigma around life insurance salesmen and trust me, I did too when I first discovered the strategy. So naturally I dug in and started researching and educating myself on the policies, various structures and carriers. How they all came together, differences, terminology, understanding how to utilize them to maximize my intention for using them etc. 

    It took me a while to learn and back then, no one was using them, at least no one I knew. Now a days, many in the real estate industry are using them to give their investments a boost. So there’s lots of detail around that now. This blog post will not discuss the intricate mechanics of policies and how they work but rather how I’ve decided to use them in my personal home economy and the high level benefits we are already seeing since we started our policies a few years ago. 

    Around the same time I was learning about whole life insurance policies we had also started investing out of state buying rental properties. We bought a few with the idea that we would give one to each of our children to manage and benefit from as they grew older. As we started to construct the policies we found out we could: 

    1. Front load the policy with existing savings accounts we had
    2. Decide how much to pay every month for the premium 
    3. Decide when we wanted to stop funding the policy

    So as we put all the pieces together we realized we could in theory put down $20k to buy our rentals, which we were doing anyway, and have the monthly cash flow pay the premium for the policy. Unfortunately we discovered this after we had already purchased the home. The better way to do it would have been to front load the policies, then take out a loan to purchase the home and use the cash flow to pay back the loan and pay the policy premiums. 

    In effect, we will have invested $20k per property, and someone else will pay our policy premiums. By the time we stop paying the premiums at age 18 they will have earned an annual return in the policy cash value and about a 22% annual return from the rental property equity. Talk about having your money work hard for you!

    Another added benefit is that the policies are in effect for their whole life. Which means that they will have these policies for their entire lives where the cash value will continue to grow year over year. They will always have access to cash value to use as a savings bank account until they pass. And when that time does come they will leave the cash value death benefit for our grandchildren. 

    Lastly, some additional benefits of the policies are: 

    1. Getting children policies while they are in good health will mean you get the best rates.
    2. If they happen to have a life threatening illness, you can tap the policy to help pay for the cost of treatment. 
    3. If the worst happened and they passed, you would receive a lump sum death benefit to use to pay for funeral costs or to donate to charity.

    As every policy is set up differently and every carrier is different, please confirm that your policy will have the same benefits.

    Still curious about whole life insurance? We connected with Lesley Batson, founder of Rebel Rock Wealth, to get all of the deets on how whole life insurance can supercharge your investments. Check it out below!

    Julie Lam

    Julie Lam


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