Life insurance can be a useful tool in caring for your family’s needs once you pass away. It can also be quite valuable when it comes to helping you build wealth and maintain financial security while still alive. Understanding how life insurance works and which policies have the most flexibility will help you make the most out of each dollar you spend on securing your future.
Using Life Insurance to Build Financial Security
Life insurance is purchased for different reasons. Some use it to guarantee that their loved ones will get a specific amount upon their death. Others who may not have a lot of financial security will purchase a policy for a higher dollar amount to ensure their loved ones will have what they need if the unthinkable occurs. They can use a sensible investment and transition it into a substantial amount of money.
Strategies to Create Wealth
Purchasing a life insurance policy on yourself or another member of your family is how you can work toward building wealth. Many life insurance policies offer you the option to cash them in once you have raised enough equity. Financial firms will also buy the equity in your policy for a percentage of the total value.
Single-Premium Life Insurance
A single premium policy secures the policy’s death benefit with one deposit. This can turn into a substantial payout if the amount of the single premium is large enough and the insured is young and in good health. The longer the premium is held in trust, the higher the payout will be. The higher the single deposit, the more you will make on the transfer, even if you are over 65.
Building Financial Security
Single premium policies can also be used as a cash reserve since you have already established that much equity. You can either borrow against the policy or turn it in and receive the single deposit as well as any additional equity that may have built up in the form of interest. Because the deposit is seen as cash value or equity, it can be returned if there is ever an instance where the insured needs to terminate the policy.
Options Available for Life Insurance Cash-Outs
Most life insurance policies have riders that allow for cash-outs if the equity is substantial enough. Some riders will allow for an accelerated death benefit that the insured can borrow against. This allows them to use the money almost immediately for a variety of reasons. The money is tax-free and may be able to provide the funds they need to live comfortably.
Choices for the Elderly
Simplified underwriting allows the elderly to get the life insurance coverage they need no matter what health conditions they may be dealing with. A single premium policy is one of the most efficient options in this situation. Elderly individuals in good health may still be able to qualify for a more traditional life insurance policy and actually pass the medical exam.
Tax Advantages
There are tax advantages of a life insurance policy. If you are the beneficiary of a CD, savings bond, or annuity, you will be required to pay taxes on the amount you receive. If you are the beneficiary of a life insurance policy, on the other hand, the amount you receive will be tax-exempt. It’s important to talk to an agent before choosing a life insurance policy. Some may not be as cut and dried as they sound and will end up costing you more in the long run.
When you have questions about life insurance and want to learn about the different types of policies, you will want to schedule an appointment with a reputable insurance agent. Contact our team at the J. Archer Insurance Group at your earliest convenience to find out everything you need to know to choose a policy that best suits your needs.
