Many people in Middle Class America listen to and follow the advice of both Suze Orman and Dave Ramsey. People expect that the advice they are giving is accurate based on their celebrity status. However, the worst possible advice they could give, is their opinion regarding High Cash Value Life Insurance. They are both either ill-informed regarding the product or maybe think that Middle Class America lacks the intelligence to understand an advanced wealth concept.
If High Cash Value Life Insurance was the “worst possible investment” (Dave Ramsey) anyone could make and “NO” one should ever buy it, then why are all of the major banks and large corporations in America invested so heavily in this product. Banks hold so much of this type of Life Insurance that it has it’s own name, BOLI (Bank Owned Life Insurance). The assets are so strong that the FDIC allows banks to classify their High Cash Value Life Insurance holdings as Tier I capital because of its ability to be easily converted into cash.
In 2012, there were approximately 1,110 BOLI cases sold for approximately $4.4 billion in assets. Many of these policies are single premium purchases with an average premium of $2 million dollars. In 2012, approximately 55% of all banks held BOLI assets.
Banks hold High Cash Value Life Insurance for the same reason that we advise our clients to do on a daily basis. Below are the major reasons why Life Insurance is a sound & smart investment:
1) The interest earned is typically significantly higher than other investments with similar risk.
2) Money grows Tax-Deferred.
3) Money can be withdrawn Tax-Free.
4) Investment diversification.
5) Provides a death benefit.6) There is no waiting period to withdraw money from account.
If our banks, corporations and super wealthy in America use High Cash Value Life Insurance, then why is it not an acceptable investment vehicle for the middle class? This is a Wealth Concept that needs to be shared and understood by everyone!