Dr. Murphy: Opt out of the Financial Mess with Life Insurance

It turns out that the great Austrian Economist of the 20th century Ludwig von Mises observed that Americans prepared for uncertain futures by saving with life insurance in his classic text Human Action. Who knew?! Dr. Murphy lays out why this was so, offers a potential explanation for why we no longer do, and suggests why the solution to our financial worries may require turning back this uniquely American history. 

Read an excerpt below. Check out the full article originally published at FEE here.

Taking all things into account, a growing number of Americans are surprised to discover that a boring old permanent life insurance policy offers a simple way to largely secede from the financial system in which the masses participate, yet without going into truly exotic outlets (such as cryptocurrencies) that are difficult for some to understand. As things currently stand, permanent life insurance offers an outlet for savings that is remarkably robust across several criteria (such as liquidity, safety, privacy, and usefulness in estate planning). By relying on a permanent life insurance policy as a main vehicle for long-term saving, a household is naturally assured of substantial financial assistance in the event of a breadwinner’s death, reducing reliance on government “social insurance” programs. Yet this vehicle reaps other benefits, too: The household is much less vulnerable to stock market volatility, and (over time) can wean itself from the use of commercial lenders to finance car purchases or other major expenses. To repeat, this growing trend of using life insurance as a savings vehicle is nothing revolutionary or faddish; a century ago Americans would have considered the practice quite commonplace.