Revolutionizing Your Portfolio: Life Insurance as an Investment Tool


Understanding Life Insurance as an Investment

Life insurance, particularly whole life insurance, is often underestimated in the investment world. It’s not just about the death benefit; it’s about building a financial asset. Whole life policies, especially those structured for overfunding, can accumulate significant cash value. This cash value grows over time, often at a rate superior to traditional savings accounts. The growth is not only tax-deferred but can be accessed tax-free under certain conditions, making it a powerful tool for wealth accumulation and for use in a passive investing strategy.

The Cash Structured Strategy

The ‘Cash Structured’ strategy involves leveraging the cash value of life insurance policies to invest in other assets. This strategy works well for those who seek a balanced approach to investment, combining the safety of life insurance with the growth potential of other investment avenues.  By borrowing against the policy’s cash value, investors can maintain their life insurance coverage while using the loan to invest in higher-yield opportunities, such as passive real estate investments, thus optimizing their overall portfolio performance.

Key Components of the Cash Structured Strategy:

  • Building Cash Value: The primary step is to select a whole life insurance policy that allows for overfunding. Overfunding means contributing more than the standard premium, which accelerates the growth of the policy’s cash value.
  • Borrowing Against Cash Value: Once the cash value has accumulated, the policyholder can borrow against it at a relatively low interest rate. This loan is not a withdrawal, so the cash value continues to earn interest, potentially offsetting the cost of the loan.
  • Investing the Borrowed Funds: The borrowed funds can then be invested in other avenues, such as real estate, stocks, or even starting a business. The idea is to invest in something that has the potential to yield a higher return than the interest rate on the borrowed amount.
  • Tax Advantages: A significant advantage of this strategy is the tax treatment. Loans from life insurance policies are typically tax-free, and the growth within the policy is tax-deferred, making it an efficient investment vehicle.

Practical Example:

Imagine an investor, Alex, who has a whole life policy with a substantial cash value built up over the years. Alex decides to borrow $50,000 from his policy’s cash value at a 4% interest rate. He then invests this amount in a rental property that is expected to yield an 8% annual return. Not only is Alex’s insurance policy still intact and growing, but he is also earning a higher return on his investment than the interest he pays on the loan.

Considerations and Risks:

  • Interest Rate Risk: The interest rates on loans against life insurance policies can vary. It’s crucial to ensure the investment’s return outweighs the cost of the loan.
  • Investment Risk: As with any investment, there’s a risk that the returns may not be as high as expected, which could impact the overall benefit of this strategy.
  • Policy Performance: The performance of the life insurance policy itself is subject to market conditions and the insurer’s financial health.

Premium Financed: Maximizing Returns through Leverage

In the ‘Premium Financed’ strategy, the focus is on amplifying growth through leveraged investments. By using bank loans to fund policy premiums, investors rapidly increase the cash value of their policies. This cash value can then be used to fund further investments. This strategy is particularly attractive for those willing to take on more risk for potentially higher returns. It requires a careful balancing of loan interest rates against the expected returns from invested capital.

Essential Aspects of the Premium Financed Strategy:

  • Utilizing Bank Loans for Premiums: Instead of paying premiums from personal funds, investors use bank loans to finance the premiums of a whole life insurance policy. This approach accelerates the growth of the policy’s cash value.
  • Growing Cash Value and Death Benefit: The rapid payment of premiums using borrowed funds results in a quicker accumulation of cash value and an increased death benefit. This creates a larger financial asset in a shorter period.
  • Reinvesting Cash Value: The increased cash value can be borrowed against, similar to the Cash Structured strategy. These funds are then reinvested in higher-yield opportunities, aiming for returns that exceed the cost of the bank loan and the insurance policy loan.
  • Risk and Reward Balance: This strategy involves a careful balancing of risks, including the cost of loan interest and the performance of the chosen investments. The goal is to achieve a net positive return after accounting for all expenses.

Practical Example:

Consider an investor, Bella, who takes out a $100,000 bank loan to pay premiums on a whole life insurance policy. The policy rapidly accumulates cash value, which Bella then borrows against to invest in a venture with an anticipated 12% return. This approach allows her to leverage her investment capacity significantly.

Key Considerations and Risks:

  • Interest Rate Fluctuations: Both the bank loan and the policy loan have associated interest rates that can fluctuate, impacting the overall cost.
  • Investment Volatility: The success of this strategy heavily relies on the performance of the reinvested funds. Poor investment choices can lead to losses.
  • Financial Discipline: Managing multiple loans (for premiums and against the cash value) requires strict financial discipline and monitoring.

Life Insurance in Diverse Financial Plans

Integrating life insurance into a financial plan offers flexibility and security. It provides a safety net in case of untimely death while serving as a living benefit through its cash value. This versatility makes it an ideal addition to various financial goals, including retirement planning, where it can provide a tax-advantaged income stream, or education funding, where its stability can be a significant advantage.

Navigating Interest Rates and Policy Dividends

Interest rates have a profound effect on life insurance policies. Higher interest rates can increase the cost of policy loans, but they can also lead to higher dividend payments in participating whole life policies. Understanding these dynamics is vital for investors using life insurance as part of their investment strategy. It requires staying informed about market trends and adapting strategies accordingly.

Debunking Myths and Embracing Strategy

Whole life insurance is often misunderstood, with many investors overlooking its potential as a strategic investment tool. It’s important to dispel common myths and understand the unique features of these policies. Working with knowledgeable insurance professionals who understand investment strategies can help investors make the most of their life insurance policies.

Resources for Further Learning

For those interested in exploring these strategies further, take a listen to the Passive Investing from Left Field podcast, where experts like Rod Zabriskie, Founder of Money Insights Group Education, share their experiences in passive investing. Additionally, joining communities like Left Field Investors can provide support and shared knowledge from like-minded investors.

Chris Franckhauser

Vice President of Strategy & Growth, Advisory Partner

Chris Franckhauser, Vice President of Strategy & Growth, Advisory Partner for Left Field Investors, has been involved in real estate since 2008. He started with one single-family fix and flip, and he was hooked. He then scaled, completing five more over a brief period. While he enjoyed the journey and the financial tailwinds that came with each completed project, being an active investor with a W2 at the time, became too much to manage with a young and growing family. Seeing this was not easily scalable or sustainable long term, he searched for alternative ideas on where to invest. He explored other passive income streams but kept coming back to his two passions; real estate and time with his family. He discovered syndications after reconnecting with a former colleague and LFI Founder. He joined Left Field Investors in 2023 and has quickly immersed himself into the community and as a key member of our team.  

Chris earned a B.S. from The Ohio State University. After years in healthcare technology and medical devices, from startups to Fortune 15 companies, Chris shifted his efforts to consulting and owning a small apparel business when he is not working with LFI (Left Field Investors) or on his personal passive investments. A few years ago, Chris and his family left the cold life in Ohio for lake life in the Carolinas. Chris lives in Tega Cay, South Carolina with his wife and two kids. In his free time, he enjoys exploring all the things the Carolinas offer, from the beaches to the mountains and everywhere in between, volunteering at the school, coaching his kids’ sports teams and cheering on the Buckeyes from afar.  

Chris knows investing is a team sport. Being a strategic thinker and analytical by nature, the ability to collaborate with like-minded individuals in the Left Field Community and other communities is invaluable.  

Jim Pfeifer

President, Chief Executive Officer, Founder

Jim Pfeifer is one of the founders of Left Field Investors and the host of the Passive Investing from Left Field podcast. Left Field Investors is a group dedicated to educating and assisting like-minded investors negotiate the nuances of the passive investing landscape and world of syndications. Jim is a former financial advisor who became frustrated with the one-path-fits-all approach of the standard financial services industry. Jim now concentrates on investing in real assets that produce cash flow and is committed to sharing his knowledge with others who are interested in learning a different way to grow wealth.

Jim not only advises and helps people get started in passive real estate syndications, he also invests alongside them in small groups to allow for diversification among multiple investments and syndication sponsors. Jim believes the most important factor in a successful syndication is finding a sponsor that he knows, likes and trusts.

He has invested in over 100 passive syndications including apartments, mobile homes, self-storage, private lending and notes, ATM’s, commercial and industrial triple net leases, assisted living facilities and international coffee farms and cacao producers. Jim is constantly looking for new investment ideas that match his philosophy of real assets producing cash flow as well as looking for new sponsors with whom he can build quality, long-term relationships. Jim earned a degree in Finance & Marketing from the University of Oregon and a Master’s in Business Education from The Ohio State University. He has worked as a reinsurance underwriter, high school finance teacher, financial advisor and now works exclusively as a full-time passive investor. Jim lives in Dublin, Ohio with his wife, three kids and two dogs. In his free time, he loves to ski, play Ultimate frisbee and cheer on the Buckeyes.

Jim earned a degree in Finance & Marketing from the University of Oregon and a Master’s in Business Education from The Ohio State University. He has worked as a reinsurance underwriter, high school finance teacher, financial advisor and now works exclusively as a full-time passive investor. Jim lives in Dublin, Ohio with his wife, three kids and two dogs. In his free time, he loves to ski, play Ultimate frisbee and cheer on the Buckeyes.

Chad Ackerman

Chief Operating Officer, Founder

Chad is the Founder & Chief Operating Officer of Left Field Investors and the host of the LFI Spotlight podcast. Chad was in banking most of his career with a focus on data analytics, but in March of 2023 he left his W2 to become LFI’s second full time employee.

Chad always had a passion for real estate, so his analytics skills translated well into the deal analyzer side of the business. Through his training, education and networking Chad was able to align his passive investing to compliment his involvement with LFI while allowing him to grow his wealth and take steps towards financial freedom. He has appreciated the help he’s received from others along his journey which is why he is excited to host the LFI Spotlight podcast and share the experience of other investors and industry experts to assist those that are looking for education for their own journey.

Chad has a Bachelor’s Degree in Business with a Minor in Real Estate from the University of Cincinnati. He is working to educate his two teenagers in the passive investing world. In his spare time he likes to golf, kayak, and check out the local brewery scene.

Ryan Steig

Chief Financial Officer, Founder

Ryan Stieg started down the path of passive investing like many of us did, after he picked up a little purple book called Rich Dad, Poor Dad. The problem was that he did that in college and didn’t take action to start investing passively until many years later when that itch to invest passively crept back up.

Ryan became an accidental landlord after moving from Phoenix back to Montana in 2007, a rental he kept until 2016 when he started investing more intentionally. Since 2016, Ryan has focused (or should we say lack thereof) on all different kinds of investing, always returning to real estate and business as his mainstay. Ryan has a small portfolio of one-to-three-unit rentals across four different markets in the US. He has also invested in over fifty real estate syndication investments individually or with an investment group or tribe. Working to diversify in multiple asset classes, Ryan invests in multi-family, note funds, NNN industrial, retail, office, self-storage, online businesses, start-ups, and several other asset classes that further cement his self-diagnosis of “shiny object syndrome”.

However, with all of those reaches over the years, Ryan still believes in the long-term success and tenets of passive, cash-flow-focused investing with proven syndicators and shared knowledge in investing.

When he’s not working with LFI or on his personal passive investments, he recently opened a new Club Pilates franchise studio after an insurance career. Outside of that, he can be found with his wife watching whatever sport one of their two boys is involved in during that particular season.

Steve Suh

Chief Content Officer, Founder

Steve Suh, one of the founders of Left Field Investors and its Chief Content Officer, has been involved with real estate and alternative assets since 2005. Like many, he saw his net worth plummet during the two major stock market crashes in the early 2000s. Since then, he vowed to find other ways to invest his money. Reading Rich Dad, Poor Dad gave Steve the impetus to learn about real estate investing. He first became a landlord after purchasing his office condo. He then invested passively as a limited partner in oil and gas drilling syndications but quickly learned the importance of scrutinizing sponsors when he stopped getting returns after only a few months. Steve came back to real estate by buying a few small residential rentals. Seeing that this was not easily scalable, he searched for alternative ideas. After listening to hundreds of podcasts and attending numerous real estate investing meetings, he determined that passively investing in real estate syndications was the best avenue to get great, risk-adjusted returns. He has invested in dozens of syndications involving apartment buildings, self-storage facilities, resort properties, ATMs, Bitcoin mining funds, car washes, a coffee farm, and even a Broadway show.

When Steve is not vetting commercial real estate syndications in the evenings, he is stomping out eye diseases and improving vision during the day as an ophthalmologist. He enjoys playing in his tennis and pickleball leagues and rooting for his Buckeyes and Steelers football teams. In the past several years, he took up running and has completed three full marathons, including the New York City Marathon. He is always on a quest to find great pizza, BBQ brisket, and bourbon. He enjoys traveling with his wife and their three adult kids. They usually go on a medical mission trip once a year to southern Mexico to provide eye surgeries and glasses to the residents. Steve has enjoyed being a part of Left Field Investors to help others learn about the merits of passive, real asset investments.

Sean Donnelly

Chief Culture Officer, Founder

Sean holds a W2 job in the finance sector and began his real estate investing journey shortly after earning his MBA. Unfortunately, it could not have begun at a worse time … anyone remember 2007 … but even the recession provided worthy lessons. Sean stayed in the game continuing to find his place, progressing from flipping to owning single and multi-family rentals to now funding opportunities through syndications. While Sean is still heavily invested in the equities market and holds a small portfolio of rentals, he strongly believes passive investing is the best way to offset the cyclical nature of traditional investment vehicles as well as avoid the headaches of direct property ownership. Through consistent cash flow, long term yield and available tax benefits, the diversification offered with passive investing brings a welcomed balance to an otherwise turbulent investing scheme. What Sean likes most about the syndication space is that the investment opportunities are not “one size fits all” and the community of investors genuinely want to help.

He earned a B.S. in Finance from Iowa State University in 1995 and a MBA from Otterbein University in 2007. Sean has lived in eight states but has called Ohio home for the last 20+.  When not attending his children’s various school/sporting events, Sean can be found running, golfing, shooting or fly-fishing.

Patrick Wills

Chief Information Officer, Advisory Partner

An active real estate investor since 2017, Patrick Wills’ investing journey began like many others – after reading the “purple book” by Robert Kiyosaki. Patrick started with single family rentals, and while they performed well, he quickly realized their inability to scale efficiently while remaining passive. He discovered syndications via podcasts and local meetups and never looked back. He joined Left Field Investors in 2022 as a member and has quickly become an integral part of the team as Vice President of Technology.

An I.T. Systems Engineer by trade, he experienced the limitations of traditional Wall Street investing firsthand in his career and knew there had to be a better way to truly have financial freedom.

Unfortunately, that better way is inaccessible to those who need it most. His mission is to make alternative investments accessible to everyone who seeks to take control of their financial future and to pursue their passions in life.

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