The pandemic has changed how we think about, and plan for, the future. It is more important than ever to stay healthy in mind, body, and finances. Life insurance can be useful in providing protection for your family in the event of the death of someone providing support. Secondarily life insurance may be an asset used in retirement to provide additional income with significant tax advantages. In this article, we will discuss the way cash value policies may benefit you and your family in retirement.
1. Retirement Income
Opt for a permanent insurance policy designed to provide income at retirement. The cash-value account grows over time and can be withdrawn with significant tax advantages for retirement or any other event during your lifetime. Please consult your tax advisor for your individual tax advisement. Here are three examples of common uses for the cash value of life insurance:
- Down payment for a house
- Funding for college
- Debt reduction
2. Retirement
Structuring policy payouts over a 20-year period can bring significant savings. The proceeds from the policy may be tax free in the following ways:
- The withdrawals do not exceed the premium payments in the policy.
- The policy is kept in force. Your broker can illustrate this for you in an illustration from the insurance company holding the policy.
3. College Costs
If the life insurance policy is taken out early enough, say at the birth of the child, it is possible to pay college costs with the cash value of the policy. The same rules apply as above and can be an especially useful tool. We recommend checking out this blog on alternate ways to help your kids pay for college.
4. Immediate Expenses
You can borrow against the policy should an emergency arise in which you need immediate financial help. This can be useful for:
- Debt consolidation
- Mortgage or rent
- Car loan
- Funeral costs
- Uncovered medical
5. Long Term Care
Policies are now offering long term care riders to their life insurance policies. Most companies allow 90% of the death benefit amount to be used to pay long term care expenses. This can be especially useful, but it is important to point out that any money used to pay long term care expenses will be deducted from the death benefit paid to the beneficiaries. These policies have become very popular as an alternative to traditional long-term care policies. The main two reasons for that is:
- There have been significant increases in long term care premiums.
- If you do not use the policy, then all the premiums paid never get returned to the beneficiaries. There is no increased cost per premium in the life insurance policies.
Need help deciding what type of insurance will work best for your situation? Click here to book a meeting.
If you would like more information about the types of life insurance policies, please review our previous blog on life insurance benefits.
