Are You Getting the Most From Your Life Insurance?
Most people think of life insurance as a cost — a monthly premium that protects your family if something happens to you. That’s true, but it’s only half the picture. For business owners, high-income earners, and individuals focused on long-term wealth building, certain types of life insurance — particularly permanent policies with cash value — function as a strategic financial asset. They can build tax-deferred wealth, provide tax-free income in retirement, fund business continuity plans, and create an efficient mechanism for transferring wealth to the next generation. You can also explore our Life Insurance services for tailored strategies.
Prevail’s life insurance advisors in Kansas City work with clients who have already maximized their 401(k) and IRA contributions, own businesses that need protection planning, or are building a legacy they want to transfer efficiently. If that describes you, life insurance is worth understanding as more than just a safety net. For additional guidance on life insurance basics, visit Investor.gov.
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Whole Life Insurance as a Financial Asset
Group life insurance plans may not be adequate
Retirement Supplement
Permanent life insurance — whole life and certain universal life policies — includes a cash value component that grows over time inside the policy. This is what separates permanent coverage from term insurance and what makes it a genuine financial asset, not just an expense.
A portion of every premium payment goes into the policy’s cash value account. In a whole life policy issued by a mutual insurance company, this cash value grows at a guaranteed rate — typically 3% to 5% annually — and may earn additional non-guaranteed dividends on top of that base rate. Because growth is guaranteed and not tied to the stock market, it functions as a non-correlated asset: when equities drop, your cash value keeps growing at its guaranteed rate.
Cash value inside a life insurance policy grows on a tax-deferred basis — you pay no income tax on the gains as they accumulate. More importantly, policyholders can access their cash value through policy loans, which are not treated as taxable income, even if the loan amount exceeds what you paid in premiums. The death benefit paid to beneficiaries is also generally income tax-free. This combination of tax-deferred growth, tax-free access, and a tax-free death benefit is not available in any other single financial vehicle.
Unlike retirement accounts, there are no IRS-imposed restrictions on when or why you can access your cash value. You can borrow against it at any age, for any purpose — a business investment, a home purchase, a child’s education, or an emergency. The policy loan does not require credit approval and carries no mandatory repayment schedule. The one important consideration: an outstanding loan reduces the death benefit paid to your beneficiaries if the loan is not repaid before you die. Prevail designs policies with this in mind and reviews loan activity as part of every policy review.
A sound coverage strategy for most clients involves “layering” — holding term life insurance for the periods of highest financial exposure (mortgage, children at home, business debt) alongside a permanent policy that builds long-term cash value. Term coverage can often be converted to permanent coverage before it expires, without new medical underwriting. Prevail evaluates this conversion opportunity for every client holding a convertible term policy.
A Life Insurance Retirement Plan (LIRP) is not a product — it is a strategy. It uses a properly structured permanent life insurance policy, typically whole life or indexed universal life (IUL), to accumulate cash value that can be accessed as tax-free income in retirement through policy loans and withdrawals.
The LIRP strategy is most valuable for individuals who have already maximized their tax-advantaged retirement accounts (401(k), IRA, Roth IRA) and are looking for additional tax-efficient savings. Because policy loans are not treated as taxable income, withdrawing retirement income via a LIRP does not push you into a higher tax bracket, trigger Social Security taxation thresholds, or create Medicare surcharges (IRMAA) the way traditional IRA or 401(k) withdrawals do.
The LIRP strategy requires the policy to be properly structured from the start — specifically, it must be funded at levels that maximize cash value relative to the death benefit, without crossing the Modified Endowment Contract (MEC) threshold set by the IRS. A MEC changes the tax treatment of loans and withdrawals, eliminating the tax-free access that makes the strategy work. Prevail designs LIRP-oriented policies with these parameters built in from day one.
Note: The LIRP concept was popularized by New York Times bestselling author David McKnight. Prevail has featured a discussion of this strategy on our resources page.
Business owners face life insurance planning needs that employees do not. A death, disability, or departure of a key person can threaten the financial stability of a company overnight. Life insurance is a core tool for managing these risks and for structuring a business to survive and transfer successfully.
Key person insurance is a policy owned by the business on the life of an employee whose death would cause significant financial harm — a founder, a top salesperson, a technical expert, or any individual whose loss would materially disrupt operations or revenue. The business pays the premiums and receives the death benefit. That capital can be used to recruit and train a replacement, service debt, reassure lenders and investors, or simply stabilize the business during a difficult transition period. Prevail evaluates key person exposure for every business owner client and recommends coverage amounts based on the individual’s economic contribution to the business.
A buy-sell agreement is a legal contract between business co-owners that governs what happens to an owner’s interest if they die, become disabled, or exit the business. Without funding, a buy-sell agreement is unenforceable — the surviving partners may not have the liquidity to buy out the deceased owner’s family. Life insurance is the most common and efficient funding mechanism. A cross-purchase or entity-purchase structure ensures that the buyout proceeds are available immediately at death, without requiring the sale of business assets or outside financing. Prevail coordinates with your attorney to align the insurance structure with the legal agreement.
Life insurance is frequently used in executive compensation and retention strategies. A split-dollar arrangement, executive bonus plan, or non-qualified deferred compensation plan can be structured around a permanent life insurance policy to provide meaningful benefits to key executives while offering tax advantages to the business. These plans can be designed so that the death benefit and/or cash value ultimately benefit the executive or their family, creating a powerful retention incentive tied to continued employment.
The data on life insurance in the United States reveals two persistent problems: too many people have no coverage at all, and many of those who do have coverage are significantly underinsured. Both problems leave families financially exposed.
Over 102 million American adults either have no life insurance or carry less than they need to protect their families’ financial future. For many, the gap is not a lack of interest — it is a lack of personalized guidance on how much coverage is right for their situation. Prevail starts every life insurance engagement with a needs analysis tied to your income, debts, dependents, and financial goals.
Nearly three in four adults assume life insurance costs more than it actually does, according to the 2024 Insurance Barometer Study by Life Happens and LIMRA. This misconception is the single biggest reason people delay getting covered. In reality, a healthy 35-year-old can often secure $500,000 of 20-year term coverage for less than the cost of a daily coffee. Prevail will show you real numbers based on your age and health profile before you make any decision.
Nearly half of American adults say their households would face financial hardship within six months of losing their primary wage earner — and 40% say their loved ones would be barely or not at all financially secure. These are not abstract statistics. They represent families who have not yet had the right conversation about coverage. Prevail helps clients close that gap with coverage that fits their actual income, debt, and family situation.
A majority of working adults say their only life insurance is through their employer. The problem: employer group coverage typically provides one to two times annual salary — far below the 10 to 12 times income that financial planning standards generally recommend. Employer coverage also ends the moment you change jobs or retire. Prevail reviews existing employer coverage as part of every client needs analysis and recommends supplemental coverage to close gaps.
Source: 2024 Insurance Barometer Study, Life Happens and LIMRA
The most common reason people delay getting covered is a belief that premiums are unaffordable. According to the 2024 Insurance Barometer Study, Americans overestimate the cost of a $250,000 20-year term policy for a healthy 30-year-old by more than three times the actual average cost. Term life insurance — which provides pure death benefit protection for a fixed period — is one of the most cost-effective financial products available, especially when purchased while young and healthy. Permanent policies carry higher premiums because they include a cash value component that builds actual financial value over time, making them an investment in addition to protection. Prevail will provide a no-obligation illustration of actual costs based on your age, health, and coverage needs before you make any commitment.
Life insurance is relevant to anyone who has dependents, debts, or a business that would be financially impacted by their death. A death benefit can immediately cover a mortgage balance, fund children’s education, replace lost income for a surviving spouse, pay off business debt, or provide an estate liquidity source for heirs who might otherwise have to sell illiquid assets quickly. Single individuals without dependents may still benefit from permanent life insurance as a wealth-building tool or to lock in insurability while healthy and young. The right answer depends entirely on your financial situation — not a blanket rule.
Employer-provided group life insurance is a valuable benefit, but it almost never provides sufficient coverage on its own. Group policies typically pay one to two times your annual salary — financial planning standards generally recommend coverage of ten to twelve times income to adequately replace a wage earner’s economic contribution to a household. Beyond the coverage gap, employer policies end when your employment ends — leaving you uninsured at exactly the moment you may be most difficult to insure due to age or health changes. A personal policy provides continuous, portable coverage that is not dependent on your employment status.
Many people with chronic health conditions assume they are uninsurable. In reality, most health conditions — including well-managed diabetes, high blood pressure, a history of cancer in remission, and many others — do not disqualify applicants from coverage. They may affect the premium or require a specific carrier, but coverage is often still obtainable. Prevail works with multiple carriers and understands which underwriters are most favorable for specific health profiles. We also evaluate options like guaranteed issue policies for clients where traditional underwriting is not feasible. The only way to know your real options is to apply through an advisor who has access to the full market.
There is no age at which life insurance becomes unavailable, though premiums increase with age and some product types become less accessible. For seniors, final expense policies, guaranteed universal life, and certain whole life products remain available into the 80s. For retirees who want to leave a tax-free inheritance or cover estate taxes, a permanent policy purchased in their 60s or 70s can still be a highly efficient wealth transfer tool. Survivorship policies — which cover two spouses and pay at the second death — are particularly cost-effective for estate planning purposes because the underwriting burden is shared. The earlier you act, the more options you have and the lower your premiums will be.
This is the most important myth to address for wealth-building clients. Permanent life insurance builds a cash value account that belongs to you while you are alive. That cash value grows tax-deferred, can be accessed at any time through policy loans without triggering income tax, and can be used for any purpose — retirement income, business investment, education funding, or emergency liquidity. A properly funded whole life policy from a mutual company has historically grown cash value at rates comparable to intermediate-term bonds, with the additional benefit of a guaranteed floor and no market correlation. The death benefit is the protection layer on top of an asset you are already building. You are not paying for something you may never use — you are building an asset that pays a death benefit as a bonus.
*Source: 2024 Insurance Barometer Study, Life Happens and LIMRA
Life insurance serves as an asset that provides a safety net against financial emergencies and unexpected life-changing events.
A majority of working adults (55%) say they have life insurance coverage through their employer.
Men continue to be more likely than women to report owning life insurance: 54% versus 48%.
Gen Z and Hispanic adults are the least likely to say they own life insurance.
40% of American adults believe they need more life insurance, representing close to 100 million adults.
Insufficient coverage has grave consequences for countless families.
Nearly half (47%) say they would have trouble paying living expenses within six months of their primary wage earner’s death.
40% of adults say their loved ones would be barely or not at all financially secure should the primary wage earner die unexpectedly.
Many people mistakenly believe life insurance is too costly and only necessary for the young and healthy or fully covered by employer plans.
The honest answer is: it depends on the type of policy, how it is structured, and what you are trying to accomplish. Life insurance is not a substitute for a diversified investment portfolio, and it should not be evaluated purely on rate of return. The right question is not “is life insurance a good investment?” but rather “does life insurance solve a problem that no other financial tool can solve as efficiently?”
Bruce Gordon discusses strategies to help protect your financial future, diversify your assets by tax class, and be proud of the legacy you leave!
Term life insurance provides a death benefit for a specific period — typically 10, 15, 20, or 30 years — and has no cash value. If you die during the term, your beneficiaries receive the benefit. If you outlive the term, the coverage ends with no residual value. Whole life insurance is permanent — it covers you for your entire life as long as premiums are paid — and includes a cash value account that grows at a guaranteed rate over time. Term insurance is generally the right choice for pure income-replacement protection on a budget. Whole life is appropriate when the goal includes long-term asset building, estate planning, or business continuity in addition to protection. Many Prevail clients hold both: term for maximum coverage during high-exposure years and a permanent policy for long-term wealth and legacy goals.
A Life Insurance Retirement Plan (LIRP) is a strategy, not a product. It uses a permanent life insurance policy — typically whole life or indexed universal life — funded at levels that maximize cash value accumulation relative to the death benefit. Over time, the policyholder builds a substantial cash value that can be accessed in retirement through tax-free policy loans. Because policy loans are not treated as taxable income, LIRP income does not trigger higher tax brackets, Social Security taxation, or Medicare IRMAA surcharges the way traditional IRA or 401(k) withdrawals do. The LIRP strategy requires precise policy design from the start — the policy must stay below the IRS Modified Endowment Contract (MEC) threshold to preserve the tax-free loan treatment. Prevail structures LIRP policies with these parameters built in and monitors them through annual policy reviews.
Prevail begins every life insurance conversation with a needs analysis rather than a product recommendation. We review your existing coverage (including employer group policies), your income replacement needs, outstanding debts, dependent obligations, business interests, and estate situation. We then evaluate your tax position and savings profile to determine whether a permanent policy would add meaningful value beyond what your existing financial vehicles already provide. Life insurance is not appropriate for every client at every stage of life, and we will tell you directly when it is not the right fit.
Life insurance has several tax characteristics that must be aligned with a client’s broader tax strategy. Cash value grows tax-deferred, meaning it does not generate annual 1099 income. Policy loans are not taxable income, which allows high-income clients to access wealth without pushing into higher brackets. The death benefit is generally income-tax-free to beneficiaries. However, if the policy is owned personally and the estate is taxable, the death benefit may be included in the taxable estate — an irrevocable life insurance trust (ILIT) can remove it. Prevail works alongside your CPA and estate attorney to ensure the policy structure, ownership, and beneficiary designations are aligned with your overall tax and estate plan.
Life insurance is one of the most efficient mechanisms for transferring wealth at death because the death benefit is paid immediately and is generally income-tax-free. For clients with taxable estates, an irrevocable life insurance trust (ILIT) can hold the policy outside the estate, so the proceeds can be used to pay estate taxes without being subject to them. For clients with illiquid assets — a family business, real estate, or a closely held investment — a life insurance death benefit provides immediate liquidity so heirs are not forced to sell assets under time pressure. Survivorship policies, which cover two lives and pay at the second death, are particularly effective for estate planning because they are less expensive than two individual policies and the benefit arrives exactly when estate settlement costs are due.
Prevail conducts a structured policy review covering four areas: structure (is the policy type — term, whole life, universal life — still appropriate for your current goals?), performance (for permanent policies, is the cash value growing as originally illustrated, and have dividend or crediting rates changed materially?), cost (are the internal costs — mortality charges, administrative fees — competitive with current market alternatives?), and alignment (do the death benefit amount, ownership, and beneficiary designations still reflect your current financial situation and estate plan?). Many clients come to us with policies that were sold correctly years ago but have since drifted out of alignment with their goals. We provide a written assessment and a clear recommendation — keep, modify, replace, or supplement.
Policy type is determined by the primary planning objective. If the goal is pure income replacement on a budget, term insurance delivers the most death benefit per premium dollar. If the goal is permanent protection combined with cash value accumulation for retirement income or estate planning, whole life from a mutual company provides the strongest guarantees. If the goal is permanent coverage with some upside tied to market indices and flexibility in premium payments, indexed universal life may be appropriate. If business continuity is the primary driver, the policy type and ownership structure depend on whether the goal is key person protection, buy-sell funding, or executive benefits. Prevail does not have a default product — every recommendation is built around your specific situation.
For permanent life insurance, how much you fund the policy and how consistently you maintain that funding level are the two most important drivers of long-term performance. Underfunding a universal life policy — particularly in low-interest-rate environments — can cause the policy to lapse years before death, eliminating both the death benefit and the cash value. Overfunding a whole life policy beyond the IRS MEC threshold changes the tax treatment of loans and withdrawals. For LIRP strategies, the policy must be funded at a specific level to maximize cash value without triggering MEC status. Prevail provides a funding schedule at policy inception and monitors actual-vs-projected performance at every annual review to catch drift early.
The most common red flags are: (1) a universal life or variable life policy with a declining projected lapse date — this means the policy is underfunded relative to its original illustration and may not survive to pay the death benefit; (2) premium notices for a policy that was supposed to be “paid up” — this signals that actual performance has fallen below illustrated assumptions; (3) a significant life change — marriage, divorce, a new child, a business sale, or a large inheritance — that makes the original coverage amount or beneficiary designations outdated; (4) a gap between your income replacement needs and your actual coverage that has grown as your income or debts have increased. Prevail recommends a formal policy review at least every three years and after any major financial or life event.
Underperformance typically results from one of three causes: the policy was improperly designed at inception (wrong type, wrong funding level, or wrong carrier for the objective), it has been underfunded over time, or market or dividend conditions have changed the projected performance trajectory. Prevail addresses all three through proper design at the outset, an annual review process that compares actual cash value and projected lapse dates against the original illustration, and proactive funding adjustments when performance drifts. For policies we did not originally design, we conduct a full audit before making any recommendation to replace or keep — replacing a policy always has costs, and we only recommend it when the math clearly supports doing so.
Prevail recommends a formal review at least annually for clients using life insurance as a wealth-building or retirement planning vehicle, and at minimum every three years for clients with straightforward term or permanent coverage. A review should happen immediately after any major life event: marriage or divorce, the birth of a child, a significant increase or decrease in income, the sale or acquisition of a business, an inheritance, or the diagnosis of a serious health condition. The goal of each review is to ensure that coverage amounts, policy structure, beneficiary designations, ownership, and funding levels remain aligned with your current financial situation and goals.
Insurability is a financial asset that depreciates with age and health changes. One of the most valuable steps a younger, healthy individual can take is securing permanent coverage — or at least a convertible term policy — while their health profile earns the best available rates. A convertible term policy allows the holder to convert to permanent coverage before the term expires without new medical underwriting, which means that a health change after the original policy is issued does not eliminate access to permanent coverage. Prevail actively monitors clients’ existing convertible term policies and flags conversion windows before they close.
Life insurance fills roles in a financial plan that investment accounts cannot. A taxable brokerage account, 401(k), or IRA can generate wealth but cannot provide an immediate, guaranteed, income-tax-free death benefit. Cash value in a permanent policy provides a non-correlated, guaranteed-growth component that offsets market volatility in the investment portfolio. Policy loans allow clients to access capital for investment opportunities without triggering a taxable event or disrupting portfolio positions. For business owners, life insurance provides the liquidity for buy-sell agreements that no investment account can replicate. Prevail treats life insurance as a complement to the investment portfolio — filling specific gaps — rather than as a replacement for any component.
Cash value in a permanent life insurance policy is genuinely liquid, but not instantaneously so, and the mechanics matter. Policy loans are typically processed within one to two business days and carry no mandatory repayment schedule. However, the available cash value in a new policy is minimal in the first few years — it takes five to ten years of consistent premium payments to build substantial accessible cash value. Prevail sets explicit expectations at policy inception about the timeline for cash value accessibility and ensures clients do not over-rely on a policy for near-term liquidity needs before the value has had time to accumulate.
Prevail recommends against permanent life insurance as a strategic wealth-building tool in several situations: when the client’s cash flow cannot support consistent premium payments over a 10+ year horizon; when existing retirement accounts have not been maximized and a Roth IRA or 401(k) match would deliver better returns on the same dollars; when the planning horizon is too short for cash value to accumulate meaningfully; or when the client’s goals are better served by term insurance combined with direct investment. We believe that recommending against a product when it is not the right fit is fundamental to operating as a fiduciary — and it is the only basis on which clients should trust any recommendation we do make.
