At Kensington Financial Associates, we believe that properly managed finances turn dreams into reality.

From proper budgeting of household expenses to maximizing returns on investments pursuant to an individual’s risk profile: a holistic approach to financial planning is necessary to grow one’s net worth and be ready for all of life’s unexpected surprises. Whole Life Insurance is an invaluable tool that can be used to build cash value in a tax-efficient* manner while hedging against market risk. In addition, it serves as a contingency plan that provides a sound financial footing for the policyholder and their loved ones in the event of unforeseen circumstances.

The cash value component of a whole life insurance policy increases drastically over time and is tax-deferred for as long as the policy holder maintains their policy. The utilization of a loan to access this cash value is in many cases the best option to quickly access funds to capitalize on business opportunities, renovate your home, pay medical bills, or even pay college tuition.

However, the same financial flexibility that unrestricted use of up to 95% of the policy’s cash value provides can very quickly turn into a serious problem for those who don’t use it responsibly. Those who lack financial restraint and accumulate debt by splurging on liabilities may be tempted to bail themselves out with a cash value loan.

By taking a cash value loan from their policy to cover short-term debt obligations, some borrowers would be putting themselves in a position that they could potentially never recover from. If a policy holder is unable to repay the loan or cover future premium payments, their policy is at risk of lapsing. If this were to happen, not only would the client incur a tax liability on the money they borrowed, but they would lose coverage as well. For this reason, it is important to remember that while a cash value loan can be a useful tool to raise funds for personal or business opportunities, it should never be used as a Band-Aid for a larger financial issue.

At Kensington, our loan specialists make the financial health and satisfaction of our clients their number one priority. By maintaining frequent communication with your insurance carrier to ensure policy health, continually conducting collateral analysis, and utilizing LTVs of 93-95% of the total cash value, Kensington puts its clients in the best position possible to make informed and responsible decisions with their funds.

* IRS Circular 230 Disclosure: Kensington Financial Group does not provide legal, tax or accounting advice. To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this message (including any attachments) was not intended or written to be used, and cannot be used for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any matters addressed herein. You should obtain your own independent legal, tax or accounting advice based on your particular circumstances.