Liquidity, liquidity, liquidity

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Unless you’ve been living under a rock (and if you have, please stop, that sounds very uncomfortable), you’re aware of the banking crisis kicked off by the Silicon Valley Bank collapse and its ripple effects on the financial markets.

You may be thinking, “Well, that’s an understatement. I’m downright worried.”

Yes, this story is developing rapidly, and the markets have been turbulent. But it’s not a time to hide (no matter how comfy that rock sounds right now), nor a time to panic and make rash decisions about your finances.

Instead, tune out the headlines, and tune into the fundamental issue at hand: liquidity and access to cash.

In the same way liquidity is crucial to bank risk management, it’s also an essential factor in your own financial plan.

Which is where insurance comes into the conversation. 

Yes, insurance. Cash-value life insurance, to be specific. 

More than a means for taking care of those we leave behind when the inevitable happens, cash-value insurance can also provide liquidity.

While cash-value life insurance is not typically considered a primary savings vehicle, there are some potential benefits to incorporating certain types of cash-value life insurance policies into your overall financial plan, such as:

  1. Protection against losses: Cash-value insurance policies offer savings that can protect against losses. For example, if you have a cash-value life insurance policy, your cash value may protect you from losses during market volatility or a market downturn.
  2. Access to funds: Properly structured cash-value insurance policies allow you to access the cash-value component on a tax-efficient basis. These options can provide flexibility if you need access to funds for emergencies or other unexpected expenses.
  3. Uninterrupted compounding: In the words of Albert Einstein, “Compounding interest is the eighth wonder of the world.” Some types of cash-value insurance policies, such as whole life insurance, offer guaranteed minimum returns on the cash value component of the policy, which can provide predictable tax-free growth on your savings. 
  4. Tax advantages: The cash-value component of properly structured life insurance policies can grow tax-deferred, which means that you do not have to pay taxes on the growth, and it can transfer to your beneficiaries tax-free. Additionally, some policies allow you to withdraw money tax-free as long as you meet certain conditions.

As with all financial products, trade-offs exist, such as potentially high fees. So, a conversation with your financial advisor is a crucial next step in exploring whether properly structured cash value insurance can be added to your circle of wealth. 

If you need guidance in determining where insurance fits your financial plan, Kaspian Group is here to help. Contact us at kwesi@kaspiangroupinc.com to get the conversation started.

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