Here’s a startling statistic: at least 20 million individuals in the Black community are without adequate life insurance coverage.*
One of our goals at The Hanna Agency is to change that.
Why? Well, we believe that having life insurance is fundamentally important not just for the numerous benefits that it grants when a loved one dies, but also because it can be used as a tool to create something called “multi-generational wealth.”
Using best practices to create multi-generational wealth can have a profound affect on the life of an individual, the culture of a family, and a livelihood of a community. Anything that can be done to allow for people to live out their hopes and dreams is worth the time and energy it takes to become educated.
So let’s take a look at the process of creating multi-generational wealth by first defining what, exactly, multi-generational wealth is.
What is multi-generational wealth?
Patrick Hicks at TrustandWill.com defines it as this:
“Generational wealth is wealth that is passed down from one generation to the next. It begins when one member of a family accumulates enough wealth in their lifetime to pass down to their children, usually through a Trust or a Will. In turn, these children may leverage this wealth to create additional wealth and pass it on to their own children, and so on and so forth. Passing on wealth for more than one generation is considered multigenerational.”
Great. So now, knowing what it is, how can we utilize something like life insurance to create multi-generational wealth?
Well, for starters…
The proceeds from your life insurance are typically tax-free.
This is, of course, huge.
Most people who receive the money from a life insurance policy don’t have to pay taxes on it, as the proceeds generally are not counted in calculating gross income. (Any interest the policy receives, however, would be subject to taxation.)
Why is this important? Well, taxes are… a lot. And so the inheritance of these funds in manner that removes taxes could help catapult your family to a different economic status.
A life insurance policy can ensure your child’s education.
Let’s say, God forbid, that you were to die prematurely while your children are still young.
We know what life insurance does in this scenario. We know that ongoing living expenses are taken care of. We know that funeral expenses are typically covered.
But, perhaps more profoundly, it can also keep the dream of a college education for your kids alive. Many parents opt for a term life insurance policy during these years, as it is an affordable way to get a large amount of coverage. And typically, that larger need ends when the children graduate.
A lesser-known benefit of permanent life insurance is that it can also help with college costs while you are alive. In addition to the death benefit, it also accumulates something called “cash value” over time. You can tap that money in the future for whatever you want, such as to help with college costs. (Just keep in mind that the death benefit would be reduced by the amount you tapped that you don’t repay.)
How does this add to multi-generational wealth? Simply put, statistically speaking, people who are college-educated tend to earn more over their lives. So, by ensuring that your child goes to college, you can preserve, or even add to, the wealth that is distributed over generations.
The likelihood that your child’s child goes to college increase, as well.
Let’s take at another way that the “cash value” of your policy can help you in your journey towards creating multi-generational wealth.
You can now weather a financial emergency with “cash value.”
In the event of an emergency—which could range from medical bills to helping your small business stay afloat financially—you can take out a loan against your permanent policy.
While you’d be charged interest, it’s usually lower than what’s charged by other lenders. And access is much easier than getting a traditional loan since the money is already there in your policy acting as collateral.
This helps create multi-generational wealth in the way you’re already imagining. One of the main reasons that wealth is diminished, and not passed on to descendants, is because it is spent on things like exorbitant medical bills or businesses that can’t weather an economic downturn.
Did you think that life insurance could help you in this way? We bet you didn’t.
You could use something called “accelerated death benefits” to provide for you and your family before you pass.
Terminal illnesses can take a huge toll on family finances. As we said in our previous point, medical bills are one of the leading causes of financial ruin. If you click that link to the Forbes article, you’ll see that more than 50 percent of Americans struggle to repay medical debt.
If you were faced with a terminal illness, and you have a life insurance policy that has an “accelerated death benefit”, you could feasibly access the money in the policy while you’re living. What for? Well, the obvious thing would be to pay medical bills or for the cost of your care while you’re still alive.
You could even use the “accelerated death benefit” to take a dream vacation with your family. Any amount left over would still go to your chosen beneficiaries after you die.
So what are you waiting for…?
We know it isn’t the most fun way to spend your day. And we know that talking about one’s own death can bring up all sorts of emotional baggage that you might not want to sort through.
However, we hope that we have made a compelling point here. Wealth that you have generated can grow in the years to come. In fact, it can grow exponentially. And that wealth can be used to help your family and your descendents live out wildly fulfilling lives.
Think about how you want them to remember you. Is it as someone who died, leaving a series of annoying and energy-intensive action items? Or do you want them to remember you as someone who thought ahead, and left your family in a better spot than they ever were when you were alive.
It’s simple: when you purchase a life insurance policy for your family, it is a straightforward and affordable way to help build wealth and put your loved ones ahead of the curve.
Ready to get started? Calculate an estimate of how much coverage you need by using our Life Insurance Needs Calculator.
*According to the 2021 Insurance Barometer Study conducted by LIMRA and Life Happens.