Thinking about life insurance can be unsettling. No one wants to think about benefits that are derived once you pass away. Life insurance can be an uncomfortable subject, which is why certain potential benefits of insurance are often overlooked. In this blog, we will discuss features and benefits and things that you likely didn’t know you can do with your life policy. As you learn about these options, you will realize that life insurance doesn’t have to be such a gloomy topic. There are many different types of policies, such as term life, whole life, universal life, and return of premium. Different policies offer different benefits, so being knowledgeable on the different ways to use your policy’s features can aid in choosing which one best suits you. All too often, consumers are focused on the price point of life insurance and not enough on the other benefits, such as flexible premiums, the opportunity to have the cash value invested or using it for college tuition as well as hybrid life insurance and long-term care policies. Here is a list of some of the key benefits of your life insurance policy that you may not know about.
1. Provides benefits if you’re terminally ill. This feature, known as a rider, is called a living benefit. It is primarily offered on term and whole-life policies. There are conditions that apply to this benefit. Living or accelerated benefits allows those with a life expectancy of 12 months or less to receive a part of their death benefit in advance. Most people are unaware that many policies include this rider.
2. Pays cash if you’re disabled. Some insurers offer riders for critical or chronic illnesses. If you experience a heart attack, stroke, become disabled, or suffer any other type of critical condition, then you may be eligible to receive a portion of the death benefit.
3. Right to borrow your cash value. If you have a life policy that accumulates cash value, you may be able to borrow from your cash value. The death benefit, however, is reduced by the outstanding loan amount at the time of death. Since the proceeds are a loan, the money you receive is not subject to taxes and may be used for any purpose.
4. College tuition. People often find that their life insurance policies have provided some better returns on their money. They can borrow the money without having to pay taxes. As long as they pay the interest, they do not have to repay the loan. The amount of the loan will be deducted from the death benefit when the insured dies. The policy loan rates are typically lower than taking out a normal college loan. Using this perk is a great way to cut costs and utilize your life insurance policy.
5. Pay for long-term care expenses. Long-term care insurance is expensive. Did you know that you can add a rider to a life policy to acquire this coverage? Although there’s an extra cost to adding this coverage, it works out better than buying two plans. Keep in mind whether the coverage comes as a rider or specialty policy, this will reduce the amount of the death benefit.
6. Reduces retirement taxes. There are ways to reduce your retirement taxes by leveraging loans. You can treat your life insurance policy as your personal pension if done correctly. There are a wide variety of strategies using withdrawals and loans that can lead to tax-free money in retirement. As you shop for a policy, keep this in mind and consult with an expert to make sure you get the most out of your policy.
7. Waive your premiums. Among the many riders that you can add to your policy, this is standard on most policies. This allows you to keep your coverage if you become disabled. Premium waivers eliminate premiums for a qualifying injury or illness. Although this benefit is standard on most policies it is rarely utilized because people just don’t know about it.
8. Charitable Contributions. Policies can be a good way to leave a sizeable donation to your favorite charity. Choosing a charity makes sure that, after you pass, you are spreading love to those in need.
9. Paying Final Expenses. Life insurance policy benefits can be used to help pay for cremation costs, medical bills (not covered by health insurance), estate costs, and other expenses that have not been paid.
10. Return of premium. This rider adds every premium to the death benefit. This means your heirs will receive your premiums in addition to the death benefit. While this is a great benefit, you do have to pay extra to have this rider added to your policy.
Now that you know some of the additional benefits of life insurance, shopping for life insurance policy may be a little easier. There are many different types of policies that align with the benefits you may need. Don’t just consider price but review the benefits and features to ensure they suit your needs. The top four types of life insurance include term life, whole life, universal Life, and Return of Premium. All of these differ in benefits and flexibility. Having a clear understanding of what each policy does is important for you and your family, providing security when you pass away.