Most people know that a life insurance policy is an insurance contract between a purchaser and an insurance company where the company promises to pay a specified monetary benefit to the policy beneficiaries after the insured party dies, as long as no misrepresentations are made and the premiums are paid consistently. While that is the main reason most people purchase life insurance, it doesn’t mean your policy can’t be used as part of a sophisticated financial planning strategy.
While Term life insurance provides protection for a specified period of time and typically pays out only if the insured passes during that term, Permanent life insurance will provide lifelong protection as long as the premiums are paid, and generally gains cash value. Since the policy accumulates cash value it offers some important living benefits. Here are a few things you probably did not know you can do with your permanent life insurance:
Start a Business
Banks typically won’t lend money you money to start a Richardson, TX business that isn’t bringing in revenue, meaning you’ll need to fund it yourself. You could tap into your savings or borrow from family and friends, but one often overlooked source of funding is your life insurance policy’s cash value.
Fund a College Education
Your life insurance policy accumulates cash value over time, which can be borrowed against to help finance a college or secondary education. No worries about financial aid forms or applying for bank loans – just ask for the money. Actually, you can use the cash value for anything you want, but Allegiance Insurance Agency recommends funding a college education as a use that will pay off in the long run.
Take Time Off to Care for a Parent
Unlike starting a business or sending your kid to college, it’s hard to control the timing of family emergencies, especially concerning elderly parents. By tapping into the accumulated cash value of your life insurance policy, you’ll be able to take time off or put your career on hold while caring for your family member.
Grow Your 401(k)
By tapping into your life insurance policy’s cash value, you can cover your first few years of retirement, leaving your 401(k) funds to grow longer. Additionally, the safety your life insurance policy provides allows you to take a more aggressive strategy in allocating your 401(k) investments.
Care for Yourself
In the event that you suffer from a chronic illness and remain too ill to perform two of six daily living activities, your permanent life insurance policy may allow you to have early access to your death benefit, effectively using money from it while you are alive. Your beneficiary would receive any remaining benefits when you die.
Allegiance Insurance Agency, your Richardson, TX insurance expert, can help you design a life insurance policy that meets your needs, whether a simple death benefit or a sophisticated financial planning tool. Call us today for information about your life insurance options.