Five Uses for Life Insurance You May Not Know About

Joe Mazzucco |

When people think of life insurance, what usually comes to mind is settling the deceased's final expenses and providing financial support for their beneficiaries. Although these are the most common uses of life insurance, they offer financial resources to other situations. Here are five cases where using life insurance may be appropriate:

Retirement funding- If you own whole life insurance, you can borrow against the policy's cash value (without tax consequences) to supplement your retirement. You will still have some remaining death benefits as long as you don't use all of the cash value or surrender the policy. 

Pay for long-term care- Adding a rider to a life insurance policy can effectively pay for long-term care. By using a particular dual-insurance product, long-term care combines with life insurance so that the cash value can help cover long-term care costs. If the unused cash value is available at death, the policy pays a death benefit to beneficiaries.

Provide benefits if you're terminally ill- Standard on many term and whole-life insurance contracts, 'living benefits' allow those with a life expectancy of fewer than twelve months to access a portion of the death benefit before their death.

Estate planning- If you have a large estate, you want to ensure that the estate remains ‘intact’ and beneficiaries don’t have to liquidate assets to pay estate taxes. Life insurance can pay estate taxes and settle outstanding debts while not jeopardizing the estate's assets. It also provides an easy way to remove beneficiaries from dealing with these situations. Using life insurance in estate planning involves working with an attorney and financial and tax professionals to determine if this is appropriate for your situation.

College funding- If you’re a parent or grandparent, life insurance can be used for funding part or all allowable education expenses for the insured (child) without tax consequences, assuming interest applies to the cash value. If the child doesn’t use it for education funding, you give them the gift of life insurance for themselves or their beneficiaries.

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Important Disclosures

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

Riders are additional guarantee options that are available to a life insurance contract holder. 

While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing. All guarantees and benefits of the insurance policy are subject to the claims-paying ability of the issuing insurance company. They are not backed by the broker-dealer and/or insurance agency selling the policy, or any affiliates of those entities other than the issuing company affiliates, and none makes any representations or guarantees regarding the claims-paying ability of the issuer.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

This article was prepared by Fresh Finance.

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