Many clients think that life insurance is just a monthly bill that they can only use to cover their own death. But little do they know that more than that, there are other creative ways to use their life insurance while they are still alive. This form of benefit is recently offered by most insurance companies to honor the policyholders or the insured persons and to let them feel the perks of their policies. Here are the living benefits that you didn’t know your term or whole life insurance could give you.
Reduce retirement taxes
Earning more money is equivalent to a higher range of tax bracket. But if you have your life insurance policy, then you won’t have to worry about paying for expensive retirement taxes from your pension in the future. Your life insurance can help you reduce retirement taxes through cash value supplement. This means that you can use your cash value in covering any partial amount of your tax. In fact, retirees with life insurance policy can save up to 35% from tax payments compared to those who are not insured. The cash value works similar to a dividend that is usually distributed to the clients assuming that all premiums are paid. However, there is no guaranteed or specific amount of cash value as it may grow or reduce according to the company’s market performance.
Apply for loans from the cash value
Aside from reducing your retirement taxes, you can also use your accumulated cash value as a source of loans. The insurer will not set a schedule for your repayment but you have to be minded that it may take between 5-9% interest charges from you. The accumulated charges will then reduce the benefit after death. That’s why a lot of people are torn between options of borrowing or withdrawing their accumulated cash value. Nonetheless, the good thing about keeping your cash value stored is to let it grow in order to take bigger dividends in the future.
A source of fund for certain health problems
From reducing retirement taxes to borrowing or withdrawing your accumulated cash value, your life insurance can also provide you with a source of money to address certain health problems especially if you have been disabled due to an accident. This type of assistance may vary depending on the type of policy you have and the extent of its coverage. It doesn’t really cost you charges as long as there is an insufficient fund stored in your policy. Rely upon the cases below:
For insured persons with disability – the provided benefit that covers a vital safety net funding is often presented to disabled members who are not yet capable of working. The fund includes the settlement of their hospital bills.
For insured persons with chronic diseases – members with incurable diseases can also expect the same benefit. They may also receive half of their final payout in advance if the doctor confirms that they only have a year or less to live.
Return your money after the expiry date
This feature is only available to members with term life insurance policy. This gives the insured an option to take their accumulated premium only if they do not die after the expiry date of their policy. The term usually runs between 10 to 30 years after the date of purchase. But you can also choose to renew your policy every year until you reach the age of 95.
Sell the policy
Selling the policy in exchange of cash is possible but not everyone is entitled to do so and not everyone is eligible to purchase a plan. This only shows that the process of selling the policy, also known as a life settlement, comes with certain conditions. You can only sell your policy if you were able to deposit the required face value or the amount of your lump sum premium (depending on the type of policy and the insurer’s protocol). Majority of sellers are senior citizens with ages 65 and up or the ones who have terminal diseases. The policies are then sold to reputable companies in replacement of payment which typically costs 20% to 25% of your death benefit. Although that is pretty cheap for you, especially if you have been paying premiums for half of your life. The only thing that makes life settlement beneficial is to keep your policy from lapses (if your reason for selling is you can no longer pay for premiums). So it’s either you take it or leave it.
The author holds a bachelor’s degree in Communication with expertise in certain fields like advertising and media marketing. She currently works as a web content contributor for Insure Me Now Life Insurance, an award-winning life insurance company in Australia. What motivates Sarah to keep writing is her passion of providing information to all readers out there.