One of the most common reasons individuals get life insurance is to cover their loved ones’ last costs and provide financial assistance for their dependents. In addition to providing financial resources for these eventualities, cash value and whole life insurance policies may be used in a variety of other circumstances. A life insurance policy may be applicable in the following six situations:
1. Retirement funding- To augment your retirement income, you may be able to borrow against the cash value of your whole life insurance policy. As long as you don’t utilise all of the cash value or surrender the insurance, you will still get a portion of the death benefit. Have a discussion with your insurance provider to learn about the specifics of utilising life insurance proceeds to support your retirement.
2. Pay for long-term care- Adding a rider to a life insurance policy may successfully cover long-term care costs. Life insurance may be combined with long-term care so that the cash value can be used to pay for long-term care expenses. Beneficiaries get a death benefit if the policy’s unused cash value is still available at the time of death.
3. Provide benefits if you’re terminally ill- If you’re terminally sick, you’ll get benefits. In many terms and whole-life insurance policies, ‘living benefits’ enable persons with a life expectancy of less than a year to obtain a part of the death benefit before they die.
4. Estate planning- Planning for your estate is essential to ensuring that your loved ones don’t have to sell assets for estate taxes if you leave a substantial legacy behind. Paying estate taxes and settling debts without risking the estate’s assets may be done through life insurance. Additionally, it gives a simple method for removing beneficiaries from these circumstances. In order to include life insurance in your estate planning, you’ll need to collaborate with an attorney, financial and tax experts, and a financial advisor.
5. Business succession planning- If you own a firm and want to pass it on to a family member or other important employee, life insurance might be part of the purchase agreement by the intended future owners. In order to fully grasp the ramifications of the IRS law and to assist guarantee that company succession planning is done appropriately, consulting a tax specialist and an attorney is recommended when using life insurance in this manner. Life insurance is typically part of a company owner’s retirement or estate plan when it comes to succession planning.
6. College funding- A parent or grandparent may use life insurance to pay for some or all of their child’s college fees without incurring any tax penalties if interest is applied to the cash value of the policy. The gift of life insurance may be given to the kid if they don’t utilise it for school expenses. When your kid reaches maturity, you may want to inquire with the life insurance company about transferring ownership of the policy to the child.
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The cash value of a life insurance policy may also be used in other circumstances. Please call our office if you have any inquiries concerning life insurance.