Published June 26, 2023
Most individuals purchase life insurance with the intention of protecting their loved ones. They seek peace of mind knowing that their surviving family members will be financially secure after their passing. However, many may not realize that life insurance can offer benefits that extend beyond death.
Benefits of Living Insurance Policies
Some life insurance policies provide “living benefits,” enabling policy owners to access financial support while they are still living. For instance, if the policyholder requires long-term care due to a terminal or chronic illness, they may access some or all of the life insurance policy’s death benefit, independent of the policy’s cash value. Medical qualification is necessary, and policyholders can often utilize their own physician to certify the need for benefits.
The Term vs. Cash-Value Debate
The common phrase “buy term and invest the difference” holds merit in certain situations. For instance, individuals renting their homes should aim to purchase property, thereby building equity. Similarly, opting for a cash-value life insurance policy can provide additional benefits compared to merely maintaining a term policy for extended periods.
Utilizing Living Benefits for Health Care Costs
Research may direct you to cautionary tales about using life insurance for purposes other than death benefits. Nevertheless, engaging with living benefits, also called accelerated death benefits, can be transformative. If illness strikes, these living benefits can significantly enhance your coverage.
Permanent life insurance, such as universal or whole life insurance, allocates a portion of premiums into an account that accumulates cash value. Accumulating sufficient cash value may allow policyholders to take loans against or withdraw funds in emergencies, such as unexpected home repairs or job loss. It’s important to note that borrowing from the policy does not incur taxes, although interest payments will apply.
Consulting a Financial Adviser
Before acquiring a life insurance policy, it’s wise to conduct thorough research and compare various insurers, policies, and costs. Discussing with a financial adviser regarding how different insurance types and policies could impact your retirement income or tax plan is crucial. Also, remember that borrowing or withdrawing from your policy may reduce the benefits intended for your beneficiaries.
Maximizing Life Insurance Benefits
Understanding the full advantages of a life insurance policy can yield significant returns for your family both during your lifetime and after. When structured correctly, a life insurance policy can fulfill dual roles: offering financial protection for your family and providing living benefits while you’re still alive. Therefore, it’s essential to explore these options fully.
In summary, evaluating your life insurance strategy can help you enhance your financial planning and security. Engaging with living benefits and understanding their applications can contribute meaningfully to your overall financial wellness, particularly in retirement.
Kim Franke-Folstad contributed to this article.
Disclaimer
This article presents the views of the contributing adviser and does not necessarily reflect the editorial stance of iBestTravel. For verification of adviser credentials, refer to the SEC or FINRA.
Greg Elie is a seasoned financial professional with over 33 years of industry experience, focused on helping clients navigate retirement and protect their assets from inflation and market fluctuations.
