How our life insurance policies rescued us during the coronavirus crisis. Part I – Whole Life Insurance and the Coronavirus Crisis
I always explain to clients how important it is to have permanent cash value insurance as a key foundation in one’s wealth plan.
Without insurance, you are completely exposed to financial hardships, which can be devastating, especially in retirement. Having permanent insurance however gives you access to cash values in the policy that can buffer you from life’s what ifs.
Last November we purchased a flip project in Peterborough. Now normally I am not a “flip” person. We have had a huge success in buying single family homes, on our own, and with investment partners, and converting them into duplexes. The work increases the value of the property as well as provides attractive monthly cash flow. But this particular project had enough meat on the bone so to speak so we took on a new venture.
The problem with flips, is and always will be, if the market turns you can get snookered. Well we listed the house for sale March 5th with the intention of holding back offers for a week. And as you all well know … March 12th the poop hit the fan so to speak.
Now I had poured much of my time and our money into this project, expecting the big payoff in April. Lines of credit and credit cards were maxed. We had purchased the property with an 8% private mortgage. – (Property could not be purchased with a traditional mortgage because of the state of disrepair.) We were snookered …. except for … yes … our insurance policies.
Two quick calls, we have policies with Equitable Life and Canada Life, and we were easily able to access our policy cash values. Money was in our bank account within a week. There were sufficient funds to cover the entire cost we had put into the flip project – both the down payment and the renovation money.
Going through this experience really showed me firsthand what I had been explaining to clients over the years. Our insurance policies saved us when we needed it most. We were able to pay off all the debts and then we obtained a traditional mortgage. We would never have been able to get that mortgage if the lines and debts had been in place.
We ended up renting out the property as a single-family home. The property does cash flow – mostly because of the low mortgage balance though. And while we were ablet to get all our money out, the profit is still sitting in the property as equity. Our plan will still be to sell it at some point. But it may prove to be even more advantageous to wait and have the profit treated as a capital gain (the flip would have been at a higher income tax rate).
We are so grateful to have had our policies which provide us with a good return and flexible access to safe money quickly.
Let’s face it … life is not going to be all smooth sailing. Especially the 20 – 30 years you are in retirement. Shouldn’t you build a better wealth plan with access to safe guaranteed money in order to weather the storms?