Are Premiums Expenses or Deposits?

by | Apr 23, 2014 | 0 comments

Is it really an expense or is it a deposit in disguise?

If the bank sent you a notice that you were to put money into your savings every month would you look at that as an expense or a deposit?

Clearly, that would be a deposit in your mind. They would just be reminding you to add money to your savings. We even think of them as the good guys for reminding you.

If I talk to you about whole life insurance your immediate reaction is “that is too expensive. Why would I throw that kind of money away?” We all know (if you have read my other blogs posts) that whole life has cash value in it and that is money you have access to borrow against.

If you pay a premium and you then have a portion to all of that money to borrow against, is that an expense or is that a deposit? For example, you paid the insurance company their premium and they increased your cash value by the same amount. Was that an expense to you?  No, it was not, that was a deposit into an account, just not an account at your local bank. Better yet, it was a deposit into your account at the bank you own!

Some of my clients like to explain it like a savings account. They pay their premium (deposit) and they then have access to money in their savings account, which is just at a different location.

Next time someone talks to you about whole life insurance or you get your premium notice in the mail for your whole life policy take a step back and think again. That is the best deposit request you have ever gotten.

It’s all in your thinking. An expense is something that loses you money. Deposits are money you put somewhere to use later.

Hope that helps and clears up a few things. It’s a hard concept to grab after being brainwashed for so many years.

Mary Jo


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