You Didn’t Know You Could Do With Life Insurance
When many of us think of life insurance, we think of a benefit to help with final expenses and replace lost income. While this is true, many policies provide impressive living benefits as well. Here are 5 things you may not have known that life insurance can do that will show you there’s much more to it than just leaving a legacy.
1. Fund an Education
Sending a child to college comes with a hefty price tag these days, but thankfully you can borrow against the cash value of your life insurance policy and use it to help pay for tuition, books, housing, whatever you need. No applying for financial aid, dealing with a 529 plan, or stacking up student loan debt. If you or your children have different goals, the money could also be used for any other type of education or even your retirement.1
2. Pay Off the Mortgage
It’s beneficial to reduce debt in all areas of your life and, in an ideal world, to eliminate it completely. But that can be a lofty goal. Thankfully, with proceeds from a life insurance policy, you could pay off one of your larger debts, your mortgage. If you’re looking to be a first time homeowner, you could also consider using funds from your life insurance policy as a down payment on your dream home.
3. Enhance Your Retirement
Most insurance professionals recommend that you have enough savings at the end of your working life to replace 70% to 85% of preretirement income. Many people are finding traditional means of funding a comfortable retirement are not sufficient, especially in today’s unpredictable economic world. It’s important to consider creating a supplemental retirement strategy; one that provides for the accumulation of funds, tax advantages and flexibility. Your life insurance policy can be a great supplement to your retirement plan and the cash value can provide needed retirement income, often for the rest of your life.1
4. Launch Your Own Business
Starting your own business can often be a challenge to get off the ground, particularly gathering the proper funds in place to do so. Many times bank loans are not easy to come by for start-ups and if you don’t want to pitch to investors, this leaves you and your savings. An overlooked source of funds for a new business is your life insurance policy. One of the key advantages of permanent life insurance is the ability to withdraw or borrow against this cash value that is set aside in an accumulation account and use this money to accomplish your goals.1
5. Provide Funds for Long-Term Care
Many permanent life insurance policies have a provision or a rider that lets policyowners use some of the cash value for chronic care or long-term care. So if you become terminally ill, confined to a nursing home, or need specialized care for a chronic condition, you’ll have access to money to help pay for that care while still preserving some or most of the insurance money as a death benefit to pay out to your beneficiaries.2
1 It’s important to remember there are implications to borrowing cash value or taking withdrawals from your life insurance policy. Withdrawals and loans reduce the cash value and if you don’t pay back the loan before your death, that amount plus any unpaid interest will be subtracted from your death benefit. If you keep up with a regular loan payment schedule and repay the money as soon as you can, your family will still receive a full death benefit. To understand how to tap into all the great advantages of a life insurance policy and see other creative uses, contact one of our insurance professional for full details.
2 Policies may have riders for long term care coverage and chronic illness coverage. Policy loans from life insurance policies generally are not subject to income tax, provided the contract is not a Modified Endowment Contract, as defined by Section 7702A of the Internal Revenue Code. A policy loan or withdrawal from a life insurance policy that is a Modified Endowment Contract is taxable upon receipt to the extent cash value of the contract exceeds premium paid. Policy loans and withdrawals will reduce cash value and death benefit. Policy loans are subject to interest charges. Please consult with an attorney or tax advisor in regards to your specific situation.