Life insurance basically provides cash benefits to your loved ones after you die. However, there is more to life insurance than this simple description. In fact, the majority of us thinks that we can only make sense of our policy after dying and that we do not have any personal gain from it while we still live. Wrong. Life insurance has as many benefits while you are still alive as when you are already dead.
Here are the top 5 ‘living benefits’ of a life insurance.
1) Tax reward
One type of life insurance is permanent life insurance that pays your beneficiary when you die at whatever time. It is a form of lifelong protection given that you are paying your premiums. Such a policy grows a tax-deferred cash value. The growth of this cash value is guaranteed and its value will never decline. Also, your beneficiary will receive the money tax-free. Another tax benefit of your insurance is using it in paying for estate or realty taxes. This ensures that your heirs will be entitled to your assets and not necessarily to taxes.
2) Loan collateral
Another benefit of building your cash value is using it as a collateral if you want to obtain a policy loan from your insuring company or any type of loan from a bank. You may secure the highest loanable amount possible even when you have a poor credit score. Further, you may borrow against your cash value any time you want and regardless of its purpose. If you are unable to repay the loan including the interest, the borrowed amount will simply be deducted from the amount to be paid to your beneficiary when you die.
3) Dividend payment
Although not guaranteed, some insuring companies offer dividends. Dividends can be in the form of cash or credits that you may use in building the policy’s cash value further. Of course, you can also use it in paying your monthly premium or your loan or buying more coverage. Extending your coverage is also called paid-up additions. Reinvested dividends also grow tax-advantaged.
4) Flexible fund
Not only for your retirement or your children’s education, a policy gives you instant access to the money that you need. Aside from the cash that you may obtain through your dividend or a loan, you have the option to surrender the paid-up additions or terminate the policy and let the insurer surrender the cash value as an annuity. You may choose to receive the annuity for a specified period or for like. The annuity is your guaranteed income that you may use in investing in a business, purchasing a house or designating it as an emergency fund. If you need to handle an emergency, surrendering your policy and receiving your cash value in a lump sum are also possible.
5) Legacy opportunity
Not everyone is able to leave a legacy. Most of us are thinking of what we can provide for our spouses, children, and other heirs financially. Life insurance coverages present an opportunity to continue the business you built for decades in the case of your sudden demise. If you are supporting a local cause or have a choice of charity, you may name the organization as your sole or one of your beneficiaries.
In strengthening your financial position, it is about time to look for a life insurance. However, look beyond the essential death benefits that the policy offers. Think of your policy as an asset that appreciates as you grow older. In fact, this is an accessible and flexible asset that provides you with exciting benefits that you and your loved ones may enjoy while you are still here with them.