Did you know that September is Life Insurance Awareness Month? Sounds exciting, doesn't it???? Kidding aside, it is a good time to review your life insurance policies and see if you have any gaps in coverage. Term life is a great way to protect your family at an affordable cost but is limited to a certain number of years (the "term") and whole life can protect your family with no term limit. However, did you know there are ways to help your family with life insurance while you are still alive? You don’t have to simply consider end-of-life benefits regarding your life insurance policy. Here are four ways you can utilize the quality advantages of your life insurance policy during your lifetime to benefit your family and help you prepare for the next stage in your life.
1. Minimize Taxes in Your Retirement
A whole life insurance plan can be used as a tax-free form of cash flow during retirement.1 Policyholders can utilize their life insurance similar to a personal pension and make withdrawals tax free while in retirement. In this way, your life insurance policy operates like a retirement savings account in which you can use it to generate cash flow during retirement.
2. Use to Fund Your Child’s College Tuition
Your whole life insurance policy could benefit your future generations sooner than you think. Potentially, your life insurance policy could yield better rates when taking out a loan for your child’s (or your own) education than an actual student loan. And when it comes to paying back the interest, the money goes right back into your policy.
Additionally, your life insurance can also cover your student loans should any debt exist when it goes into your estate. Should your estate contain any student loan debt, your life insurance coverage can cover the tax placed upon your debt.
3. Explore Living Benefits
When the least expected occurs, your life insurance policy can function as additional cash flow support through living benefits. Living benefits can be used as a portion of the death benefit to be used in certain situations. This way, the death benefit is not entirely used during your life but policyholders can still rely on the added financial support of life insurance benefits during your life.
Living benefits can provide financial assistance in the form of chronic illness benefits in which you can receive aid in various activities including dressing and eating. Terminal illness benefits are also available through your life insurance policy for those who have been certified by a physician. Those needing financial support for medical care during their life expectancy that is shorter than 12 months can use their life insurance policy for living benefits.
4. Sell It Should You Outlive Your Policy
Believe it or not, outliving your life insurance policy is a possibility. If this should be the case for you, when your policy term ends (and if you have never made a claim), your insurance company could return the premiums you have made towards your policy (if you have whole life insurance - of course, you always want to check on the specifics of your individual policy). Once received, you have the ability to use them as you see fit, including investing the funds or saving them.
Outliving your life insurance could be considered one of the more unexpected benefits of your policy. Policyholders have the option of continuing coverage, receiving the funds in a tax-free savings account or taking out loans against it. Depending on your financial needs when your term ends, the opportunity to receive a payout from your life insurance policy is another way to benefit from your policy during your life.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.