Terry Bork
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Life Insurance - An Asset or Expense?

Term Insurance Is An Expense

Life insurance is most often viewed as an expense, like other types of insurance.  The goal is to pay the lowest possible premium for a given amount of death benefit protection. This reasoning is true if you are acquiring term insurance, which provides protection for a defined period of time, or term of 1 to 30 years. Term insurance has no cash value, and if death does not occur during the term, your insurance premiums have been an expense.

Permanent Insurance Is A Deferred Asset

When your objective is, however, to provide death benefit protection for your entire life, permanent insurance becomes a deferred asset.  The goal is to pay the lowest premium to provide death benefit protection for life.  The efficiency of this deferred asset can be measured by the Internal Rate of Return (IRR) of premiums paid, to the ultimate death benefit received.

Accumulation Designed Life Insurance (ADLI) Is A Current Asset

Accumulation Designed Life Insurance (ADLI) on the other hand, focuses on the living benefits of life insurance, including maximizing policy cash value, and accessing policy death benefits during lifetime. This sophisticated financial tool, which until recently was available only to major corporations and financial institutions, places emphasis on policy cash value as a current asset.  Policy cash value is an attractive “alternative asset strategy” with a unique combination of advantages not available with any other financial instrument or cash accumulation strategy.

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