When most people think about life insurance, they picture financial protection for their loved ones in the event of their passing. And while that’s certainly the core purpose of life insurance, what many don’t realize is that certain types of policies – specifically high cash value whole life insurance – can be powerful wealth-building tools during your lifetime, especially when paired with real estate investing.
At Goodegg Investments, we’re always looking for smart, strategic ways to build and preserve wealth. (And we especially love discovering hidden gem strategies that are only known and used by a select few, then trying them out and sharing them with all of you.)
High cash value whole life insurance is one such tool that more and more investors are turning to as part of their broader financial strategy. We’ve personally been using this tool for several years, for ourselves and our family members (we even have whole life policies for each of our kids!), and it has become one of the cornerstones of our own wealth building strategy.
In this article, we’ll walk you through what life insurance is, how whole life compares to term life, what cash value is and why it matters, how you can leverage policy loans to amplify your returns through real estate investments, and a few other creative ways to use this incredibly powerful strategy
The Basics: What Is Life Insurance?
At its simplest, life insurance is a contract between you and an insurance company. You pay regular premiums, and in exchange, the insurer provides a death benefit – a lump sum paid to your beneficiaries when you pass away.
The basic idea behind life insurance is to provide your family with financial security in the event that you’re no longer around to provide for them.
Who should consider life insurance? Generally speaking:
Parents with young children, who want to make sure their family is taken care of.
Couples with a mortgage, to ensure the surviving partner can stay in the home.
Business owners, who may want to protect their company or provide for a succession plan.
Investors, who can use life insurance not only for protection but also as a tool for financial growth.
If you fall into one of these categories, or if you simply want peace of mind knowing your loved ones are protected, life insurance can be a smart addition to your financial plan.
Whole Life vs. Term Life: Key Differences
The two main types of life insurance you’ll hear about are term life insurance and whole life insurance.
Here’s how they differ:
Term Life Insurance: Provides coverage for a set period of time, typically 10, 20, or 30 years. Premiums are usually lower, and the policy only pays out if you pass away during the term. It’s straightforward and affordable, but there’s no additional benefit beyond the death benefit.
Whole Life Insurance: Provides lifelong coverage, as long as you keep paying premiums. Premiums are higher, but in addition to the death benefit, whole life policies also build cash value over time. This cash value component is what makes whole life such a powerful tool for wealth-building.
If your primary concern is low-cost protection for a certain period, term life may make sense. But if you’re interested in combining protection with long-term financial growth, whole life can be a strategic choice.
Related: Estate Planning For Real Estate Investors: Wills, Trusts, And Asset Protection
But Isn’t Whole Life Too Expensive?
There’s a lot of chatter out there on YouTube and social media about how whole life is expensive and not worth it. And if you take it at face value, it’s true that whole life premiums are typically higher than term life premiums.
However, once you dig deeper to do a true apples-to-apples comparison, you’ll find that whole life provides far greater benefit than term life, particularly for investors.
First, as the name would suggest, term life only remains in effect for a certain term. Let’s say you’re 40 years old and you purchase a term life insurance policy for 20 years. Your premiums may be lower than a whole life policy, but if you remain alive and kicking beyond the 20 years, you don’t get a penny of the benefit.
Compare that to whole life, which, as the name would suggest, remains in effect for your entire life, as long as you continue paying the premiums. This makes whole life a true asset in your overall wealth portfolio and estate plan.
Plus, there are umpteen different ways to structure a whole life policy, and if you do it just right, you can maximize the upfront cash value and ensure that, after a set number of years, the policy dividends pay for the ongoing premiums, meaning that you no longer have to pay those premiums out of pocket!
That’s exactly how we have our policies structured – we paid higher premiums in the first few years, quickly built up the cash value, and within a few years reached a point where the dividends were able to pay the policy premiums. Magic.
What Is Cash Value And Why Does It Matter?
The cash value of a whole life policy is essentially a savings component that grows over time. A portion of your premium goes into this account, where it accrues interest and dividends (depending on the policy). Unlike your 401(k) or IRA, the growth inside a whole life policy is tax-deferred, meaning you don’t pay taxes on it as it grows.
This cash value isn’t just some abstract number—it’s money you can actually access while you’re alive. That’s what makes high cash value whole life insurance so appealing for investors.
Imagine being able to use that cash value as an emergency fund for your family, or accessing some of those funds to invest with, to amplify your overall returns.
High Cash Value Whole Life Insurance & Infinite Banking
One of the most exciting strategies that has grown in popularity in recent years is the concept of infinite banking. At its core, infinite banking is about using a properly structured high cash value whole life insurance policy as your own personal bank.
Instead of relying on traditional banks for loans, you build up your policy’s cash value, then borrow against it to finance major purchases, investments, or business opportunities.
Here’s how it works:
You pay premiums into your policy. Over time, these premiums build both the death benefit and the cash value.
The cash value grows tax-deferred. Unlike many other savings vehicles, you don’t pay taxes on the growth each year.
You borrow against the cash value when you need funds. Rather than taking out a traditional loan from a bank, you take a policy loan. This means you set your own repayment terms, and there’s no credit check.
Your money keeps working for you. Even while you’ve borrowed against your policy, your cash value continues to grow as if the money were never removed. That’s the “secret sauce” that makes infinite banking such a powerful strategy.
By adopting this strategy, you essentially become your own source of financing. Imagine using your policy loan to fund the down payment on a real estate deal, purchase a car, or even cover college tuition for your kids. Instead of paying interest to a bank, you’re paying it back to your own policy, keeping more money within your financial ecosystem.
Of course, infinite banking requires discipline and a long-term mindset. The key is to consistently fund your policy, manage loans responsibly, and think strategically about how you’re recycling your dollars. For investors who value control, predictability, and the ability to multiply their money, infinite banking can be an incredibly effective wealth-building tool.
Policy Loans: Using Your Whole Life Insurance To Invest In Real Estate
One of the most powerful features of high cash value whole life insurance is the ability to borrow against the cash value through what’s called a policy loan.
Here’s how it works:
You pay premiums into your whole life policy over time.
The cash value builds up inside the policy.
You can take out a loan against that cash value, using it as collateral.
You use the loan proceeds to invest in cash-flowing assets, like real estate.
Your whole life policy continues to grow as if you didn’t take out the loan, so your money is now working for you in two places at once.
The beauty of this strategy is that your cash value continues to grow inside the policy, even while you’ve taken a loan against it. In other words, you’re essentially putting your money to work in two places at once: compounding inside the insurance policy while also generating returns in your real estate investment.
Plus, while you do need to pay the interest on the loan each year (it’s a fairly low fixed rate loan), there’s no set timeline with which you need to pay back the loan principal. In fact, if you die before you pay the loan back, the loan amount will be deducted from your death benefit before the rest of it is paid out to your beneficiaries.
This gives you maximum flexibility as you consider how you can use that cash value to juice the returns for your investments, allowing your money to grow in two places at once.
Case Study: Leveraging A $100K Policy Loan For Real Estate
Let’s look at an example of how this might play out.
Imagine you’ve been consistently funding a high cash value whole life policy for several years, and your cash value has grown to $200,000. You decide to take out a policy loan of $100,000.
Pro tip: Always leave some cash value in the policy. Try not to take a loan out for the full amount, just in case.
You borrow the $100,000 from your insurance policy and invest passively in a multifamily syndication.
Inside the policy, your $200,000 continues to compound, growing at 4–6% annually (depending on dividends and structure).
Meanwhile, your real estate investment begins to generate 6-8% annual cash-on-cash returns, plus long-term equity growth.
Over a 5-year period, you’re seeing steady growth in your life insurance policy while also receiving quarterly distributions from the syndication, which you can use to pay the interest on the loan.
When the property sells, you receive your share of the profits, which you can then use to repay your policy loan or roll into your next investment.
Rather than a, say, 20% average annual return (including both cash flow distributions and proceeds from the sale), your overall return during that 5 years might be, say, 23%, since your money was also growing inside the whole life policy.
The result? Your money can work for you in two places at once, accelerating your path toward long-term wealth.
Related: A Peek Into The Projected Returns In A Real Estate Syndication
Why Real Estate Investors Love This Strategy
At Goodegg Investments, we’ve seen firsthand how pairing high cash value whole life insurance with real estate investments can be a game-changer. Here are a few reasons why:
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Liquidity: You can access your cash value without having to sell other investments.
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Flexibility: You decide when and how to repay the policy loan (within certain limits).
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Tax Advantages: Loans from your policy are typically not considered taxable income.
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Dual Growth: Your money grows in the policy and in your real estate investment at the same time.
This strategy aligns beautifully with the principles of infinite banking, which is all about creating your own private banking system using high cash value whole life insurance.
We’ve written about why cash flow is king—and when you pair reliable cash flow from real estate with the stability of whole life insurance, you’re creating a robust system for long-term wealth.
Whole Life As An Emergency Fund
Another often-overlooked benefit of a high cash value whole life policy is that it can function as an emergency fund. Instead of parking large amounts of cash in a traditional savings account earning minimal interest, you can build cash value inside your policy.
When unexpected expenses arise—a medical bill, home repair, or even a temporary job loss—you can tap into your policy’s cash value quickly and efficiently. And unlike traditional bank loans or credit cards, you’re borrowing from yourself, with repayment terms that you control.
This creates a powerful safety net, one that not only protects your family in the long run but also gives you peace of mind in the short term.
Whole Life Policies For Kids
You can also take out whole life insurance policies for your children. While it may sound unusual at first, this strategy comes with several benefits:
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Guaranteed Insurability: By getting coverage for your children when they’re young and healthy, you’re ensuring they’ll always have access to insurance, regardless of future health conditions.
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Cash Value Growth: Their policies will have decades to accumulate cash value, giving them a strong financial foundation as they grow.
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Educational or Investment Funding: Later in life, your children can borrow against their policies for college expenses, a down payment on a home, or even to start a business.
This can be a unique and powerful way to set your kids up for long-term financial success, and this is something that we’ve personally done for our kids (Julie has 3 kids, and Annie has 2 kids).
As they start learning more and more about finances, we continue to show them the cash value that’s building in each of their policies, and we talk about how they can use it later on in life.
As they become adults, their whole life policies become assets in their own portfolios, and they can use the cash value as their own emergency fund or opportunity fund with which to invest in their own deals.
If they want to buy a car, need a down payment for a house, need startup capital for a new business, or want to invest in real estate, they can borrow against their whole life policies without having to submit a complicated application form through the Bank of Mom & Dad. 😉
This gives kids a sense of ownership and a huge head start as they start to build their own wealth in young adulthood.
Related: Tax-Smart Ways To Save And Invest For Your Children’s College And Financial Future
Key Considerations Before You Dive In
Of course, like any financial strategy, high cash value whole life insurance isn’t for everyone. Here are a few things to keep in mind:
Higher Premiums: Whole life insurance is typically more expensive than term, and you’ll need to be comfortable with higher premiums, at least at the outset. That being said, there are ways to structure whole life policies to maximize your immediate cash value while minimizing your ongoing commitment.
Long-Term Commitment: These policies work best when you fund them consistently over many years. That being said, there are ways to structure your policy to allow your dividends to pay your premiums after you reach a certain threshold.
Policy Design Matters: Not all whole life policies are created equal. A well-structured high cash value policy is critical to making this strategy work. This one is super important. Many life insurance agents don’t even know the first thing about this strategy we’re talking about. You’ll need to find a whole life agent who’s well-versed in this strategy, so they can design the policy specifically for your goals.
Opportunity Cost: Consider whether tying up capital in a whole life policy makes sense versus other investments. The cash value will take some time to build up, particularly in the first few years, so be sure to take that into account. That being said, with the power of compounding, the value becomes exponential after several years.
For investors who are committed to building long-term wealth and who see the value in leveraging both insurance and real estate, the benefits can far outweigh the drawbacks, and this is exactly what we’ve seen with our own policies.
Bringing It All Together
At its core, life insurance is about protecting your loved ones. But with the right type of policy—specifically a high cash value whole life policy—it can also become a cornerstone of your wealth-building strategy.
By leveraging policy loans to invest in real estate, you can put your dollars to work in multiple places at once, creating powerful compounding effects that accelerate your path to financial freedom. And when combined with smart, passive real estate investing opportunities—like the ones we offer at Goodegg Investments—you’re setting yourself up for both security and growth.
FAQs
Isn’t whole life insurance too expensive?
It’s true that whole life insurance comes with higher premiums than term life. That’s because it offers more than just a death benefit—it also builds cash value you can access and leverage during your lifetime. For those who want both protection and a wealth-building tool, the higher cost can be well worth it.
Plus, you can structure your whole life policy such that your commitment is lower, if you’re not sure you’ll be able to put a lot into it. For example, with Annie’s first policy, she started it when we were just getting Goodegg off the ground.
At that time, we were not making any money for ourselves, but Annie had some savings, so she committed to putting $5,000 into the policy each year for at least 5 years. Since then, as the business has taken off, she’s taken out more policies for herself and her family, to maximize overall value.
What if I can’t repay a policy loan?
If you take a policy loan and don’t repay it, the balance will be deducted from the death benefit when you pass away. While that reduces the payout to your beneficiaries, it doesn’t impact your credit score or risk foreclosure like other loans might. That said, it’s always wise to manage loans carefully and repay when you can, so your policy continues working for you at full strength.
Can I lose money in a whole life policy?
Whole life policies are designed to provide stable, guaranteed growth in the cash value. While returns may not be as high as the stock market in peak years, they are steady and protected from market downturns. This makes whole life particularly attractive to those who value security and predictability.
In the several years that we’ve had our own policies, the growth has not wavered at all, making this a very reliable cornerstone for our wealth strategy.
What happens if I stop paying premiums?
If you stop paying premiums, your policy could lapse, but many whole life policies have built-in options, like using accumulated cash value to cover premiums for a period of time, or using dividends to cover premiums, if you have a dividend-paying policy. It’s always important to review your policy details with your provider.
How quickly can I access the cash value?
Cash value builds over time. In the early years, the growth tends to be slower, but as the policy matures, your cash value can become a significant pool of capital you can borrow against. If you work with an agent who’s familiar with this strategy, they can help you maximize the upfront cash value.
With our own policies, we were able to structure them to access approximately 70-80% of the cash value right away (i.e., if we funded $50,000 into the policy, $35-40k was available as cash value to borrow against fairly immediately).
High cash value policies are often designed to maximize early growth, so you may have access sooner than with traditional policies. And, keep in mind the power of compounding, which allows your cash value to grow exponentially over time.
Can I take out a whole life policy for my kids?
Yes! Parents and grandparents often open whole life policies for children. This can lock in insurability, start building wealth early, and create a lifelong financial foundation. Plus, it can serve as a gift that keeps growing over time.
Next Steps
If you are thinking of using whole life insurance policies to build wealth for yourself or your children, we’re here to help. As mentioned, one of the keys to making this strategy work is ensuring that you find the right agent who understands this strategy and can customize a policy to meet your goals.
We have worked with a number of life insurance brokers and agents over the years, and we’ve found some who really get this strategy.
To set up a call with a group we highly recommend, visit this page, then scroll to the bottom and click “schedule your call.”
