The common understanding of life insurance is that the family can only benefit from it after the death of the insured.
However, one TikToker has recently gone viral after claiming that this is not true, and there are many ways one can benefit from their life insurance plan while still alive.
TikTok user Tony of The Freedom Elite (@thefreedomelite), who has 30,000 followers and describes himself as a wealth strategist and mentor in his bio, made the claim about a week ago, garnering over 8 million views in the process.
@thefreedomelite #stitch with @noellelevans Learn how to use life insurance to build and USE your wealth while you LIVE! #financialfreedom #flow #wealth #wealthsecrets #passiveincome #passiveincomeassets #lifeinsurance #infinatebanking #ownership #business #mindset #wealthmindset ♬ Original sound – The Freedom Elite
The video is a sting with user @noellelevans saying, “You should get life insurance for as long as you live.”
“She’s absolutely right,” adds Tony. “We have been lied to about the implications and effects of life insurance and how it works. Since the 1980s and beyond, life insurance has been for life, not death.”
“Learn to use it the way it’s designed, just like the rich do,” he concludes.
In the comments, users were skeptical, with many citing the oft-cited case of murdering someone to collect their life insurance payments.
“You tell me all these people about dead spouses for no reason,” asked one user.
“There are a dozen other better ways to use your money,” claimed a second user. “Every time I see someone trying to bring up these policies, sell the policies…”
“Obviously this is an insurance agent who pockets your overpriced monthly premiums for years before you build up any cash value,” claimed another. “Only buy for lifetime.”
However, some shared their own stories of taking money out of their life insurance to get out of financial trouble.
“My family friend used his to buy acres and build a house,” claimed one commenter.
“I was an insurance agent,” claimed another user. “You can use your life insurance to buy a house. as long as you keep paying the premium.”
“I had to take out a loan on my life insurance so I wouldn’t be homeless a few years ago,” wrote a third user. “I was so grateful.”
@thefreedomelite later released a follow-up video trying to explain exactly how this works, although many users criticized the video for being unclear.
@thefreedomelite Insurance to build and use your wealth while you live! PART 2 #financial freedom #flow #wealth #wealth secrets #passive income #passive incomewealth #life insurance #freedom #freedomelite #win #success ♬ Original sound – The Freedom Elite
While the video isn’t as straightforward as TikToker would have liked, it seems to repeat claims made around the web on the subject, like this Fox Business article.
First, there are tabs that can be attached to some life insurance plans that pay out when an insured meets certain criteria. For example, if an insured is diagnosed with a chronic or terminal illness or needs long-term care, some plans provide benefits to meet their needs.
Next, you can simply withdraw money from your life insurance policy. This has disadvantages; The final payout upon death will be less, and the person withdrawing may also have to pay taxes on their withdrawal.
Third, one can simply give up their policy and receive the cash value or sell their policy to a third party. Both options have downsides, including fees or receiving less money than the expected payout if the policy was retained.
Finally, the option that seems to excite a majority of users on TikTok the most is to borrow money from the cash value of one’s life insurance.
According to Fox Business, when borrowing against a life insurance policy, the present value of the plan is used as collateral. This effectively means you are borrowing money from yourself, which means you can do this with no credit checks, low interest rates and potentially a flexible repayment schedule.
Additionally, “the loan isn’t technically income, so it’s tax-free,” Fox Business reported.
While users seem at odds about what to do with this information, many said they were frustrated with their financial illiteracy.
“My husband and I are 27, have three children and know NOTHING. It’s a foreign language for me,” wrote one user
The Daily Dot contacted Tony via Facebook direct message.
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*Initial publication: June 29, 2022 at 10:46 am CDT
Braden Bjella is a culture writer. His work can be found in Mixmag, Electronic Beats, Schön! magazine and more.
https://www.dailydot.com/irl/life-insurance-while-alive/ They say you don’t have to die to use life insurance