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I use Life Insurance for...
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If you’re reading this, you’ve probably got a good head on your shoulders. That’s great! It means you know how to plan ahead and make smart financial decisions that will benefit you in the long run. But maybe you could use a little help when it comes to thinking outside the box. Maybe you’re risk-averse and prefer things a certain way. Or maybe you like taking risks and exploring new opportunities. Either way, here are seven ways to use life insurance that go beyond just having a death benefit and actually help your finances in the long run:
for Its Cash Value
For some people, their life insurance is nothing more than a safety net in case something goes wrong. While a death benefit may be the primary purpose of life insurance, it’s definitely not the only reason to have it. Life insurance also provides a cash value, which is the amount you’ve paid in premiums minus any claims paid out. While this still doesn’t give you access to the money in the policy, a cash value life insurance policy can be helpful if you need money fast. No credit check. You don't need to wait until you are old enough to take the cash.
to Build or Conserve an Estate
This refers to the use of life insurance death benefit proceeds to produce capital, generally for purposes other than to pay estate taxes. For a significant number of wage earners in the United States, life insurance is the only means they have of creating an estate. Because lower-income families may not have the ability to build a sizeable estate or to make any substantial contribution toward retirement plans, life insurance often becomes the only method of providing an estate for surviving family members. In addition to creating an estate, life insurance is also an excellent estate conservation tool for many people who have managed to accumulate substantial assets. Specifically, life insurance death benefits can be used to pay estate taxes, thus eliminating the need for an estate to sell family assets or use existing cash resources to meet tax requirements
as Replacement Income
How much do you spend on cars, mortgages, groceries, insurance, new clothes, and credit cards, for example? Would your family be able to pay for all these expenses if your income was no longer part of their budget? Many people, particularly those who have close relatives reliant on their financial support, get life insurance to supplement their income. If you die, your family can keep the standard of living they're used to. In addition, if you live to retirement age, the policy’s cash value may provide the only retirement income available to increase Social Security benefits.
to Pay Home Mortgage Loans
For many people, the largest investment they will ever make is in their homes. Because of that, and for other emotional and social reasons, many families want to ensure that surviving family members can continue to live in their homes even after the death of a primary wage earner. Life insurance plans designed to retire a home mortgage can enable them to do just that. Upon the insured’s death, the surviving spouse can use the policy’s death benefit to pay off the mortgage or, he or she can invest the death benefits and take periodic withdrawals to make mortgage payments.
as an Investment
Investing often comes with a lot of uncertainty, but it doesn’t mean you should avoid it altogether. Instead, you should choose your investments wisely and make sure they suit your risk tolerance. Using a portion of your life insurance to invest can be a great way to add some additional income to your monthly budget. There are many different types of life insurance policies that allow you to borrow against the death benefit to invest. They vary in terms of interest rate and the length of time until the policy expires. You can then reinvest those funds to get an even higher return, which will allow you to make even more money in the future.
Retirement Planning
Most individuals and families feel they need to save money. While the need to save may be unrelated to the need for life insurance protection, many people have chosen to save by using life insurance. For such people, a cash value life insurance policy is not only an instrument of financial protection against premature death but also a financial asset that can be borrowed against or surrendered for cash when needed. Moreover, at retirement, it can be converted into an income stream that provides a lifetime guaranteed income, depending on the settlement option chosen, or one that is entirely tax-free.
These are just a few ways to use life insurance as more than just a death benefit. Of course, it’s important to make sure you’re getting the right type of policy for your needs. As time passes and our family’s needs, objectives, and financial situation change, the family’s life insurance needs will likely change as well. Marriage, babies on the way, buying a new home, planning children's education, starting a business, or planning for retirement demand the need to reevaluate. Is it time to re-evaluate yours?
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