For at least the last few years, the Internet has been abuzz about the “secret 770 account” that you simply must make a part of your investing strategy. Well, it’s not a secret — but it should be in your portfolio.
In this case, “770” refers to the section of the tax code covering funds inside a life insurance policy. Using the tax code to name a type of account is common: Think of the 401(k), 403(b) and the 1031 exchange.
Whole life insurance has been used for generations by corporations and dynasties to grow money safely, securely and in a tax-favored environment.
I was taught by financial gurus 25 years ago that you never put any money into a whole life insurance policy, and that theory is still being taught by some big names today. So when a friend whom I respect showed me how to use a life policy to grow and protect wealth, I spent three weeks trying to poke holes in his presentation — and I failed. Apparently, what I “knew” previously about whole life insurance was wrong.
If you are buying life insurance strictly for the protection, many advisers will recommend you buy term because it is much cheaper than whole life in the early years of the policy for the same death benefit. For example, if a 40-year-old man in good health wants $500,000 of coverage for his family, he can buy a straight term policy for 20 years for around $500 per year. The same coverage in a whole life policy might be $3,500 a year.
Financially Astute People Count on Many Benefits
If your main reason for setting up a whole life insurance policy is for the death benefit, that policy will differ from a policy whose main goal is to grow cash. Banks and Fortune 400 corporations have hundreds of billions of dollars in whole life. There are many benefits to purchasing a well-done life insurance contract. In fact, you will not find all these benefits in any other financial product.
