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  • Writer's pictureQuantum Financial Strategies


Updated: May 28

In the dynamic world of investing, being a "powerful investor" means more than just having a keen eye for market trends or a diversified portfolio. It involves the premeditated approach of financial positioning into unique financial tools that offer stability, growth, and accessibility. One such tool that QFS considers to be a foundational asset is a carefully designed whole life insurance policy. Dear Reader, please understand that this is not just any old whole life policy, but rather one that must be custom built by professionals who possess a deep understanding for policy design and mechanics. If done properly, the policy owner can receive the peace-of-mind benefits of compounding growth, tax efficiency, accessibility, and utilization that is offered through no other asset class.

The Power of Whole Life Insurance

Whole life insurance, particularly from the strong, mutually organized companies vetted through the QFS due dilligence process, is not just about paying premiums for a death benefit as stereotypes lead many to believe. It can be something so much more! In the capable expertise of a financial empowerment firm like Quantum Financial Strategies, whole life can be designed to provide a unique combination of features at the center of a robust savings and cash flow plan:

  • Guaranteed Cash Value Growth: Cash values will increase at a contractually guaranteed rate, unaffected by market volatility.

  • Policy Loans: Policy owners have the privliedge to borrow against the cash value of their whole life contracts, providing liquidity in times when opportunity presents itself, and without disrupting the compound growth of the whole life cash value.

  • Dividends: While not guaranteed, mutual companies have a unprecedented track record of paying dividends to their mutual shareholders (aka-policy owners). Dividends can then be used to purchase additional insurance or left to grow within the policy. The strongest mutual companies have never missed a dividend payment to their policy owners and many of them have been existence for 150+ years. As you'll see in the chart below, quite a lot has happened economically during this timeframe!

A Real-Life Scenario: The COVID-19 Market Dip

Consider the market conditions in late 2020 - 2022 when COVID-19 temporarily depressed the stock prices of major retail companies. Imagine you are a whole life policy owner who had strategically used this product to store cash. In this scenario, you would be in a unique position to capitalize on the market downturn without sacrificing the growth of your whole life cash value.

Example: Investing in Target (TGT)

Let's use Target Corporation (TGT) as an example. During the early stages of the pandemic, Target's stock price dropped significantly. On March 18, 2020, TGT hit a low of around $93.25 per share. Fast forward to 2022, the stock price rebounded significantly, trading above $250 per share.

COVID-19 Case Study in the Strategic Use of Whole Life Policy Loans

Breaking down the numbers

1 - Accessing Cash via Policy Loan: Suppose you had a whole life insurance policy with a cash value of $200,000. You decide to use your policy as collateral and take out a $50,000 policy loan. With the loan taken, you continue the growth of the $50,000 in your policy cash value because you took the loan against your cash value, not from it.

2 - Purchasing Depressed Stocks: With the $50,000 loan, you purchase Target stock at $93.25 per share, acquiring approximately 536 shares of TGT.

3 - Growth of Investment: Over the next two years, the effects of the pandemic begin to subside and Target’s stock price rebounds to $250 per share! Your investment grows to a value of $134,000.

4 - Repaying the Loan: Assuming an interest rate of 5% on the policy loan, the interest accrued over two years would be approximately $5,000. Repaying the loan would cost you $55,000 in total.

5 - Net Gain: After repaying the loan, you’re left with $79,000 in profit ($134,000 - $55,000).

6 - Net, Net Gain: Because the $50,000 never left your cash value, you received 2 years of dividend payments within your policy. $79,000 + 2 years of dividends on policy cash value. You just went from being a powerful investor, to a Superpowered Investor!

Some of the Benefits of This Strategy

  • No Disruption in Policy Growth: The cash value of your whole life policy continues to grow, earning dividends and compounding interest, unaffected by the loan.

  • Liquidity and Flexibility: You accessed $50,000 without needing to liquidate other investments or assets, maintaining financial flexibility.

  • Tax Advantages: The loan from your policy is generally not considered taxable income, providing additional financial efficiency.

Wrapping This Up

Being a powerful investor means utilizing every tool at your disposal to maximize growth and minimize risk. It is the byproduct of someone investing in knowledge so they can learn different things to create different results. Whole life insurance offers a unique blend of security, growth, and accessibility. By leveraging the policy loan feature, you can seize market opportunities, as illustrated in our example with Target during the COVID-19 market dip. This strategic approach not only preserves the stability of your whole life policy but also positions you to capitalize on market downturns, turning challenges into opportunities for substantial gains. When it comes to a slump in the stock market, it's a lot easier to recognize when you're currently in one than it is to predict the timing of one. Same logic applies to a stock market rally.

In a world where market volatility is a constant, having a whole life insurance policy as a foundational component of your overall financial arsenal can make you a truly powerful investor.

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