You probably already knew that life insurance can provide a lump-sum payout to your beneficiaries upon your death. But that’s not all that life insurance can do. A life insurance policy can be the solution to multiple problems that may arise in your life or the lives of your loved ones, including some that may befall you while you’re still alive.
Many people use life insurance to provide for their dependents in case of the unthinkable. But many others use these valuable tools to increase the inheritance they have to leave behind to children, grandchildren, and other loved ones, or to preserve their wealth as they progress through retirement. Life insurance can help you weather a financial crisis or pay for long-term care. You could even tap your policy to pay for college costs.
1. Enhance Your Bequest
Do you have multiple children and grandchildren and wish you had a bigger legacy to leave to all of them? Maybe you have a valuable asset that you can’t or don’t want to split up. Perhaps you don’t want to deprive your son and his family of the vacation home that they love to enjoy each year, but also don’t want to leave your daughter and her family — who aren’t big on vacations — out of the will.
Life insurance can help you leave your loved ones a larger bequest, so that you can leave all of them the legacy you’d like for them to have. For a relatively small monthly premium, you can double or triple your bequest and then some.
2. Preserve Your Wealth in Retirement
You might also buy life insurance in order to protect your estate from taxes after you pass away. Basically, this involves buying a policy that will cover the cost of any taxes your estate will incur. Estate planners refer to this practice as “wealth replacement.”
When you use life insurance to cover the cost of your estate taxes, you’ll make sure your survivors have time to grieve without having to worry about selling your property or other investments. That way, if they do decide to sell any of your legacy, they’ll be able to do it at a time when it’s advantageous and they’re able to make vital decisions with a clear head.
3. Fund Long-Term Care
If you need long-term care, your life insurance policy can help you come up with the funds to pay for it. Many policies allow policyholders to receive a cash advance on their death benefit to pay for costs associated with long-term care or a terminal illness. You may also be able to sell your life insurance policy or get a viatical settlement to cover costs associated with long-term care or terminal illness.
4. Navigate a Financial Crisis
Did you know you can borrow against your life insurance policy if you ever need cash in a hurry? It’s true. You have to have a whole life or permanent policy in order to do this, and your insurance provider will expect you to pay back the money. If you don’t pay back the money, your policy could lapse, and if you die before paying back your loan, what you owe will be subtracted from your death benefit. But there’s no credit check involved, the loan is tax-free, and you don’t even have to explain what you need the money for.
5. Pay for College Costs
One way you might help your children pay for college is by borrowing against your life insurance policy’s cash value. But you might also help your children or grandchildren pay for school by taking out a life insurance policy. This might be especially useful if you think you won’t be around to see your loved ones finish school, but even if you are, that bequest could help your children or grandchildren pay off those whopping student loans or finance their graduate education.
If you want to sleep easy at night in the knowledge that your children, grandchildren, and spouse will be provided for once you’re gone, get life insurance. But be aware that that’s just one of the ways you can use life insurance to reach your own, and your family’s financial goals. In addition to helping you enhance your legacy, life insurance can be a valuable cushion that will ease the burden of hard financial times, so that you and your survivors can enjoy a better future.