Living benefits of life insurance – Need to know

Life insurance offers more than just a death benefit; it can also provide living benefits that can be invaluable during your lifetime.

Life insurance offers more than just a death benefit; it can also provide living benefits that can be invaluable during your lifetime. Here are some of the living benefits of life insurance:

1. Cash Value Accumulation:

Many permanent life insurance policies, such as whole life and universal life, build cash value over time. This cash value can be accessed while you’re alive and used for various purposes, such as supplementing retirement income or covering financial emergencies.

2. Tax-Deferred Growth:

Cash value in permanent life insurance policies grows on a tax-deferred basis. This means you don’t pay taxes on the growth until you withdraw the funds, allowing your money to grow more efficiently.

3. Policy Loans:

You can borrow against the cash value of your life insurance policy through policy loans. These loans typically have low-interest rates, and you can use the funds for any purpose, whether it’s paying for education, starting a business, or covering unexpected expenses.

4. Supplementing Retirement Income:

Permanent life insurance can serve as a source of tax-free income during retirement. You can withdraw or borrow from the cash value without triggering income taxes.

5. Paying for Education:

Parents and grandparents can use the cash value in their life insurance policies to fund educational expenses for their children or grandchildren.

6. Emergency Fund:

The cash value can act as an emergency fund, providing a financial safety net for unexpected medical bills, home repairs, or other urgent expenses.

7. Estate Planning:

Life insurance can help with estate planning by providing funds to pay estate taxes, ensuring a smooth transfer of assets to beneficiaries, or leaving a legacy for your loved ones.

8. Long-Term Care Benefits:

Some life insurance policies offer long-term care benefits or riders. These can help cover the costs of long-term care services, such as nursing home care or in-home care, if you become unable to perform basic activities of daily living.

9. Living Benefits Riders:

Many life insurance policies offer optional living benefits riders, such as critical illness or chronic illness riders. These riders provide a lump-sum payment or income if you’re diagnosed with a covered condition, helping to cover medical expenses or other costs.

10. Business Continuation:

Life insurance can be a crucial component of business planning. It can fund buy-sell agreements, provide funds for business debt repayment, or serve as key person insurance to protect a business from financial disruption in the event of a key employee’s death.

It’s important to note that the availability of living benefits can vary depending on the type of life insurance policy and the insurance provider. Therefore, when considering life insurance, it’s essential to discuss your specific needs and goals with an insurance professional to choose the right policy and riders that align with your financial objectives.