Most people don’t know that life insurance can provide benefits beyond apart from funeral expenses.
Beyond estate planning, life insurance has a range: from potential retirement income to policies offering investment value. Here are six ways to use life insurance:
Provide money to help the people you love
When you die, basic life insurance provides a sum of money to people you care for. For certain kinds of goals, many people turn to term life insurance, which provides protection for a specific amount of time, typically from 10 to 30 years. If something happens to you during that time, your beneficiaries will receive a payment from the policy.
Create another source of retirement income
If you’re looking for a way to supplement your retirement income, a permanent life insurance policy might be the ticket. Permanent life insurance allows you to use the policy to accumulate cash value, which is especially useful if you’ve maxed out your 401(k) or have too much income to contribute to a Roth IRA or make a deductible contribution to a traditional IRA.
Have access to money in case you get sick
With longer life expectancies, people rightly worry about the costs of chronic care. With a disease like cancer or other qualifying illness, some permanent life insurance policies offer options called riders that, for an additional cost, allow you to use a portion of your death benefit while you’re still living to pay the costs associated with a terminal or chronic illness.
Protect your business and business partners
If you own a business, you not only care for your family, but also for any business partners and employees. Life insurance can be used to facilitate the transfer of business ownership, fund nonqualified retirement plans, and keep a business going during a transition.
Leave a legacy
You want to leave a meaningful amount of money to people you love and causes you care about, all while minimizing taxes. Many planning strategies use a part of the death benefit from a life insurance policy as a funding source to pay any taxes due on an estate.
Keep the tax bill down to leave more for your beneficiaries
You can give your heirs a bigger gift after a smaller estate tax bill by creating an irrevocable living trust that owns your life insurance and holds death benefits for those named in the trust.
Life insurance can provide value across all income levels, and far beyond a simple death benefit. Term or permanent, it can help to build a financial foundation for you and yours.
For more information, please read:
Life Insurance: Beyond Just Estate Planning | Kiplingers