How Smart Investors Use Life Insurance to Build and Protect Wealth

[Devin Stewart]

Hey Bigger Pockets Community,

As real estate investors, we focus on building wealth, creating passive income, and securing financial freedom. But one tool that often gets overlooked in the wealth-building strategy is life insurance - and it can be a powerful asset for your real estate business. 

Here's how life insurance can benefit investors like us: 

1. Access to Cash Value: A properly structured permanent life insurance policy (like an IUL or whole life) can build cash value that you can borrow against for property acquisitions, renovations, or even as a safety net during market downturns. 

2. Estate Planning and Wealth Transfer: If you're building a portfolio to pass down to your family, life insurance ensured your heirs inherit your properties without the burden of estate taxes or forced sales to cover expenses. 

3. Debt Protection: If you have mortgages or private loans, a life insurance policy can protect your family or business partners by covering outstanding debts in the event of an unexpected passing.

4. Business Continuity: If you invest with partners, a properly structured key person insurance or buy-sell agreement funded by life insurance can ensure a smooth transition if one partner is no longer around. 

I got into the life insurance industry part-time to help others achieve their financial goals, and I'd love to connect with any investors looking to explore how this tool can strengthen their real estate business. If you have questions, feel free to DM me or drop a comment! 

Looking forward to hearing your thoughts! 

Devin Stewart 

CA Lic #4426511


 

[Josh St Laurent]

Devin, thanks for sharing your perspective. I’ve been in the financial planning industry for nearly 13 years, hold a Master’s in Advanced Financial Life Planning, I’m a CERTIFIED FINANCIAL PLANNER™, and I also teach these concepts to aspiring CFPs and graduate students at Golden Gate University. I run a full-time planning practice focused on real estate investors, so I wanted to add a few thoughts for context:

1. Cash Value Takes Time

Many IULs (Index Universal Life policies) may take 7–10 years before you can borrow a meaningful amount of cash value. This can be a big roadblock if you need funds sooner to secure deals.

2. Fees and Commissions

A large part of your early premiums may go toward commissions and policy fees. Over time, cost of insurance, monthly charges, and surrender fees (which can last 10+ years) reduce how quickly your cash value grows.

3. Policy Loan Costs & Performance

You’ll still pay interest when borrowing against your policy. If the index underperforms—or if caps and participation rates limit returns—you might not get the growth you expected.

4. Other Funding Options

For most real estate investors, it’s worth comparing mortgages, HELOCs, or partnerships. These options can provide simpler and cheaper access to funds, especially if rapid property acquisitions are your main goal.

Life insurance is a powerful tool when used for the right reasons—like estate planning or key-person coverage. But if real estate investing is your priority, it’s important to consider all the costs and timelines before committing to an IUL. Hope this helps!