There is a wealth secret that seems obvious, but most people underestimate its value and the multiple ways it can be used. It's as simple as this: Protect what you already have and shift the risk of losing it to someone else. For most people, this means buying life insurance. Most people know that life insurance pays final expenses, but it can do a whole lot more. Let's take a look at how life insurance can help you do some of the things that wealthy people do to stay on top.

Top 4 Ways to Build Wealth With Life Insurance

  1. Fund Your Retirement
    Annuities are insurance policies that accumulate until you retire then pay retirement income until you die. Tax-deferred wealth can accumulate in annuities through much larger contribution amounts than other retirement plans such as 401(k)s and IRAs. While other plans also offer the option to "annuitize" disbursements, few people use them, choosing instead to take lump sums as needed. The result is a missed opportunity to ensure lifelong retirement payments. (For more to consider when looking into this option, read Not All Retirement Accounts Should Be Tax Deferred.)

  2. Finance Your Business
    Life insurance based on the life of the business owner or other key employees not only provides protection in case the insured dies, but it is also a source of funding for the business. Permanent life insurance polices build up cash value that can be withdrawn and invested back into the business. This low-cost financing may be easier than getting a conventional loan. (For more financing tips, see 7 Unconventional Ways Businesses Can Borrow Money.)

  3. Pass on the Family Business
    For business owners with all their wealth tied up in the business, life insurance provides a way to transfer ownership of the business. Preplanned business succession provides the funding to sell the business either to another family member or someone else. The life insurance policy would be based on the life of the owner. When the owner dies, proceeds of the insurance policy pays the family in exchange for ownership of the business. This is an excellent option to provide a lump sum to the entrepreneur's spouse. (For more insight, see How To Create A Business Succession Plan.)

  4. Be a Philanthropist
    You don't have to write a big check to fund your favorite charity. Make it a beneficiary of your life insurance. Some nonprofit organizations have life insurance policies you can buy specifically to bequeath donations to them. Your church or alma mater could receive a larger donation from a life insurance policy than you may otherwise be able to afford.

The amount of life insurance purchased is based on the wealth needs of the insured. It could be a little wealth or a lot of wealth, but if you don't have any insurance, you could be ignoring a wealth secret. (Find out how to avoid insurance pitfalls in 5 Mistakes That Can Ruin Your Life (Insurance)).

Related Articles
  1. Options & Futures

    What Does Quadruple Witching Mean?

    In a financial context, quadruple witching refers to the day on which contracts for stock index futures, index options, and single stock futures expire.
  2. Estate Planning

    Estate Planning: 16 Things To Do Before You Die

    If you don’t plan your estate, your surviving family may have to deal with disputes and probate that were avoidable.
  3. Entrepreneurship

    10 Characteristics Of Successful Entrepreneurs

    Do you have the qualities of a successful entrepreneur? Those who do tend to share these 10 traits.
  4. Options & Futures

    4 Equity Derivatives And How They Work

    Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself.
  5. Investing

    5 Up and Coming Social Media Startups

    Although the days of Facebook's dominance aren't close to being over, here are some new creative platforms gaining traction on the worldwide web.
  6. Investing

    How To Make Sure Your Healthcare Costs Do Not Ruin Your Retirement

    The best proactive plan of action for a stable retirement is to understand medical costs, plan ahead, invest properly, and consider supplemental insurance.
  7. Investing Basics

    The Top 4 Income Investments for Retirees in 2016

    These four investment types should mitigate risk in 2016 for retirees seeking income.
  8. Your Practice

    Advisors: $240B in Fees Up for Grabs by 2030

    Advisors have an opportunity to win generational assets over the next 15 years. Here are some tips on how to cater to different demographics.
  9. Products and Investments

    Cash Value vs Term Life Insurance: Which is Best?

    The debate between cash value life insurance and term insurance plus an investment plan is an ongoing one. Here's a look at both sides of the argument.
  10. Entrepreneurship

    Are You Really an Entrepeneur? A Reality Check

    If you are going to be an entrepreneur, and you’re doing it on a shoestring, you’ll need more than a good idea. Here are some skills to master.
RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Full Answer >>
  3. Where else can I save for retirement after I max out my Roth IRA?

    With uncertainty about the sustainability of Social Security benefits for future retirees, a lot of responsibility for saving ... Read Full Answer >>
  4. Does dental insurance cover implants?

    Dental implants have become a widely used procedure in dentistry. Despite their popularity, however, they tend to not be ... Read Full Answer >>
  5. Does dental insurance cover dentures?

    Most full dental insurance policies include some restorative coverage, usually meaning that up to 50% of the cost of dentures ... Read Full Answer >>
  6. Can CareCredit be used for family members?

    CareCredit has become a widely used option when it comes to paying for medical procedures, primarily procedures not typically ... Read Full Answer >>
Hot Definitions
  1. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  2. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  3. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  4. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  5. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center