We know the value of having life insurance, but many people don’t understand that a life insurance policy can help a person before they pass away.
Contrary to popular belief, life insurance is more than just a death benefit. It can be used as you move through various stages of life. When you make a monthly premium payment that doesn’t mean you can’t put your money to use before you die.
Most clients buy a policy because they love their family and want them to be taken care of should they pass away. However, insurance isn’t just to cover funeral costs and help pay off a mortgage on a home.
When you buy a policy, you can access its cash value as it accumulates via a loan when you need it. If you set it up properly, it can actually be a way of funding your retirement. It can help you settle a financial obligation, help your family cover education expenses or get out of a tight jam. However, you must remember that loans and withdrawals reduce the available cash value and death benefits. The good news is you can pay back the loan to return the policy to its original cash value.
With most policies, you can borrow free from federal income tax penalties in the contract. Loans are also tax-free so long as the policy does not terminate before the death of the insured. Your policy can help you transfer assets like IRAs and potentially increase your wealth via permanent insurance.
As you accumulate the cash value of your policy, there are many options for converting life insurance into income. You can cash in the policy for its cash value and leave the remaining portion as a death benefit. You can also leave the whole policy to a beneficiary. There are also times where the money is needed for long-term health care needs. Depending on the policy, there may or may not be tax implications based on the contract.
Many people have a hard time socking away money in the bank each month. With insurance, you can train yourself to start preparing for retirement now. Paying your monthly premium teaches you to save now, not later. If you start paying now every month, 30 years from now you will be in a better position for retirement. You can also structure your life insurance policy to help offset your estate taxes when you pass away. Doing this makes your passing less stressful on your family because they won’t have to worry about selling assets.
Please remember that life insurance can be a resource that does more than just cover funeral expenses and provide cash value to your loved ones. When you are working with clients, remember to explain there is more to a policy than just a death benefit.