Lots of people think of life insurance only as a product that protects them from the unforeseen, so their families or businesses can carry on after they die. While the death benefit of life insurance is an important reason to purchase it, a permanent life insurance policy can also build cash value that you can use during your life.
Life insurance is a great product to own because you can do so much with it. Here are seven things you probably didn’t know you could do with permanent life insurance:
1. Fund a college education.
We all know that college is expensive. But it can be more competitively priced if you borrow against the cash value of your policy. You can use it to pay for all or some of your college expenses. You can even use it to help pay for other secondary education or private school for your kids. The beauty of this scenario is that you don’t have to apply for loans from the bank or government. And if you do have student debt, you can use the cash value of your permanent policy to help pay it off.
2. Start a business.
Many people would love to start their own business, but the hard fact is that banks don’t lend money to businesses without revenue. This means you need to fund the business yourself, either from your savings or by borrowing from friends and family — and that’s not always the best idea. An often overlooked source of funds for a new business is the cash value of your permanent life insurance policy. If Walt Disney can borrow from his life insurance to create Disneyland, you can use your life insurance to make your dreams come true, too.
3. Protect your business.
Once you’ve started that dream business and it’s successful, you’re probably very busy, but you know you have to plan for tomorrow. Maybe you didn’t know that life insurance can help your business thrive well into the future. Through deferred compensation and other strategies, life insurance can help reward and retain your most important employees. It can also help fund the future sale of your business or the purchase of your co-owner’s interest in the business if they retire or die, or if they simply choose to leave the business.
4. Take time off to care for a family member.
I’ve heard our CEO, Eileen McDonnell, talk about how fortunate she was to be able to step out of work earlier in her career to spend time attending to family matters. She was able to do that in part because she could tap into the accumulated cash value of her life insurance policy.
Unlike sending a kid to college or starting a business, you can’t control the timing of these sorts of family emergencies, but you can make sure you are prepared financially when it happens. Life insurance is a great way to do that.
5. Get funds if you have a chronic illness.
Another thing you can’t control the timing of is your health. If you become chronically ill, all of our permanent life insurance policies allow you early access to your death benefit. You effectively get use of the money from your death benefit while you are alive, and then your beneficiary would get any remainder when you die.
Of course, this reduces the benefits to your beneficiaries, so life insurance should not be a substitute for long-term care insurance.
6. Grow your 401(k).
Saving enough for retirement seems to be on everyone’s minds. Fortunately, if you have a permanent life insurance policy, you might be able to take a more aggressive approach to your 401(k) investments because of the safety provided by your policy. Also, because you can tap into the cash value of your insurance policy to cover the first few years of your retirement, you can let the funds in your 401(k) potentially grow much longer.
7. Secure your retirement.
You’ve built a nice nest egg and you’re ready to retire. You might not be aware that even in retirement, your permanent life insurance policy can do a lot for you. For instance, history proves that every few years, the market goes down. During these down periods, you can use your cash value instead of liquidating your market-based assets, and instead give them time to recover. Your cash value can help you maintain your pre-retirement standard of living and retire the way you want to.
These seven ideas are time-tested, but of course, they may not be for everyone. However, they do demonstrate the ways life insurance can be used beyond just paying out a death benefit. The flexibility and security of permanent life insurance can help you out in many situations that you face in life while strengthening your overall financial health.
To learn more about what life insurance can do for you, contact a financial professional today.
* Accessing the accumulated cash value of your policy will impact your death benefit and your policy’s cash value. Additional premiums may be required to keep your policy in force.
This post is for informational purposes only and should not be considered as specific financial, legal or tax advice. Depending on your individual circumstances, the strategies discussed in this presentation may not be appropriate for your situation. Always consult your legal or tax professionals for specific information regarding your individual situation.