I you’re like most people, you’ve thought about life insurance from time to time. It’s an important piece to your financial plan and provides valuable coverage to your family.
But over time, life insurance has evolved. And it may not just be for your family to use, at the time of your death. In this article, we are going to look at some creative uses of life insurance, that you may not be familiar with.
Using Whole Life Insurance for College Expenses
Using life insurance as a college savings tool is a strategy that has been used for year. But unfortunately, many people don’t understand the advantages to this strategy. Below are some of the main advantages of using Whole Life Insurance.
- No limitations on how the cash value could be used for college expenses. Other types of savings vehicles have specific expenses, that their savings accounts can be used for.
- Life Insurance Cash Value doesn’t count against FAFSA (Free Application for Federal Student Aid) Other types of college savings account would be a part of your assets, when you go to apply for financial aid
- Cash Value tends to grow at a slow, steady rate, using dividends and interest payments from insurance carrier. Other types of college saving vehicles may have investments tied to stock market performance, and the value of account may be volatile
Using Life Insurance to Pay for Burial and Funeral Costs
Nobody likes to think about death, but many people never think about how they’ll pay for funerals, and burial expenses, at the time of one’s death. The average funeral, and final expenses may range from $10,000 to $20,000 depending on a person’s needs and final wishes.
Many people may not have enough liquid assets, to address these immediate concerns. This is where a life insurance policy could help your family out. Many life insurance companies are offering burial insurance policies, specifically designed to assist families with these expenses.
At time of death, the beneficiary will receive a lump sum, tax free death benefit payment. The family can then use this money, to address the various expenses. Or you could ‘assign’ the policy over to a funeral home, and they will receive payment from the insurance company directly. Any money left over, will then be paid to the beneficiary from the funeral home.
Life Insurance with Living Benefits
For the longest time, your life insurance death benefit, would only be used at the time of the insured’s death. That is no longer the case, as several life insurance companies are offering products, that include “living benefit riders”.
According to Matt Schmidt, of Diabetes Life Solutions, there are policies that would allow you to accelerate up to 95% of the death benefit, if you were diagnosed with a critical, chronic, or terminal illness.
Some examples are if a person had a heart attack, stroke, or treatment for cancer, they could elect to use part of their death benefit, IF they needed to. You are not required to do so, but you never know what your financial picture will look like in the future. Maybe you need money to pay for medical expenses, or if business owner you need to use the insurance to hire someone, to run your company while you are away from work. Having life insurance policies with this type of flexibility, could be useful to your family years down the road.
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