YOU’VE SHOPPED AROUND for whole life insurance and have found a policy that yields the best benefits for your family; it covers everything from your funeral preparations to aiding in supporting them for years to come. However, you may not be aware that there are some ways you can reap the benefits of your life insurance policy during your life as well.
You don’t have to consider only end-of-life benefits when choosing your life insurance policy. Here are four ways you can utilize the quality advantages of your life insurance policy during your lifetime to help benefit your family and help you prepare for the next stage in your life:
1. Potentially minimize taxes in your retirement
A whole life insurance plan can be used as a tax-free form of cash flow during retirement. As a policyholder, you can utilize your life insurance in a way that’s similar to how you use a personal pension: you can make tax-free withdrawals during retirement. In this way, your life insurance policy operates like a retirement savings account, as you can use it to generate cash flow during retirement.1
Keep in mind that this article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your tax strategy.
2. Use it to fund your child’s college tuition
Your whole life insurance policy could benefit the next generations of your family sooner than you think. Potentially, your life insurance policy could yield a better rate on a loan for your child’s (or your own) education than an actual student loan. What’s more, when it comes to paying back the interest, the money goes right back into your policy.
Additionally, your life insurance can also cover your student loans should any debt exist in your estate. In such a case, your life insurance coverage can cover the tax placed upon your debt.
3. Explore living benefits
When unexpected events occur, your life insurance policy can function as additional cash flow support through living benefits. That is, a portion of the death benefit may be used when certain situations arise during your life. With this arrangement in place, the death benefit is not entirely used during your life, but you can still rely on the added financial support of life insurance benefits during your life.
Living benefits can provide financial assistance in the form of chronic illness benefits, which can provide aid to cover support for various activities, such as dressing and eating. Terminal illness benefits are also available through your life insurance policy, and this requires certification by a physician. For those with a life expectancy of less than 12 months, their life insurance policy can provide financial support for medical care through living benefits.
4. Sell it should you outlive your policy
Believe it or not, outliving your life insurance policy is a possibility. If this should be the case for you, when your policy term ends (and if you have never made a claim), your insurance company could return the premiums you have contributed toward your policy. (If you have whole life insurance, always check the specifics of your individual policy.) Once you have received the premiums, you can use them as you see fit, and this might include investing the funds or saving them.
Outliving your life insurance could be considered one of the more unexpected benefits of your policy. Policyholders have the option of continuing coverage, receiving the funds in a tax-free savings account, or taking out loans against your policy. Depending on your financial needs when your term ends, the opportunity to receive a payout from your life insurance policy is another way to benefit from your policy during your life.
Please call 419-872-0204 for a complimentary consultation to review your individual situation.
Citizen Advisory Group is a comprehensive financial services firm that helps Northwest Ohio and Southeast Michigan’s soon-to-be-retired and retired residents effectively plan for and prepare for life’s greatest journey. In addition to helping clients with their finances, Citizen Advisory Group offers monthly health and wellness events.
Investment advisory and financial planning services offered through Advisory Alpha, LLC, a Registered Investment Advisor. Insurance, Consulting, and Education services offered through Citizen Advisory Group. Citizen Advisory Group is a separate and unaffiliated entity from Advisory Alpha.
Registration with the SEC or state does not constitute an endorsement of the firm by regulators, nor does it indicate that the adviser has attained a particular level of skill or ability. This content is for informational purposes only and does not intend to make an offer or solicitation for sale or purchase of any securities. Investing involves risk, including the potential loss of principal. No investment strategy, such as asset allocation or diversification, can guarantee a profit or protect against loss in periods of declining values. All investment strategies involve risk and have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals, and economic conditions may materially affect the performance of your portfolio. There are no assurances that a portfolio will match or outperform any particular benchmark. Investors should carefully consider the investment objectives, risks, fees, and expenses before investing.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
1. IRS.gov, 2022 ✲
