For an alternative savings or investment instrument that would provide a consistent or average return of 6 percent  over 70 years for a contribution of $8,774 per year for 30 years with no cost, no loss and no withdrawal, the calculations show that in 30 years, there will be $735,282 in the account before tax, and $541,672 after tax. The after tax result is consistently less than the return on the IUL policy in the example, and the cash value in the permanent policy begins to overtake the alternative account’s before tax value in the early 70s. Regardless of how well the alternative savings may do, it would not surpass the death benefit that the permanent policy offers.  

There is always the argument that a higher rate of return can be achieved by investing in the stock market. The question then is: “At what risk?” The death benefit in permanent life policies is guaranteed if it is managed the way it is designed to work. 

The Utility Of Permanent Life

In addition to the cost and the potential return, the utility of permanent life is also well known.

If the cash value in a policy has accumulated sufficient funds, usually in 11 to 15 years, it can be used for many purposes, which are in effect living benefits, and which include:

• Emergency fund due to its liquidity.

• Income replacement in the event of unemployment or disability.

• College funding and financial aid, as the cash value in a life policy is not included as a family asset that reduces financial aid potential, unlike the value in 529 plans which would be considered a family asset.

• Business funding, as exemplified by such business legends as Walt Disney, Roy Kroc, and J.C. Penney who cashed in their permanent policy to fund their business.

• Supplemental tax free retirement income.