Life insurance has many uses, in addition to what you probably think of as its traditional purpose. It's often the cornerstone of a good estate plan. In fact, did you know you can use life insurance as a savings tool for your children's education, for your retirement, even for making gifts to charity? It can help safeguard your family against paying for your personal debt, including credit card debt, a mortgage, or student loans. Let's take a look at these uses in more detail:
Life Insurance as a Debt Elimination Strategy
If you have a mortgage, credit card debt, or private student loans, your family will have to pay those off should anything happen to you. Do you really want them to be burdened with that debt? You can select a coverage amount that provides the cash they need to pay off your debt once you're gone. This provides everyone with peace of mind. Here's the story of a family who bought a policy for mortgage protection:
Life Insurance as a Savings Vehicle
Permanent life insurance has a savings component called cash value. This cash value typically increases every time you make a premium payment. Over time, it can accumulate quite a bit of money...into the tens of thousands of dollars! You can borrow against your policy's cash value to pay for a child's college tuition, supplement your retirement, or just give yourself a loan now and then.
Life Insurance and Retirement Planning
Many people use cash value life insurance both to save for their retirement and to provide a death benefit for their beneficiaries. Some companies offer their employees life insurance purchase options as part of their retirement plans. Some people also use cash value life insurance as a substitute for a qualified retirement plan. If your company doesn't offer a retirement plan or if you've already contributed the maximum amount to your qualified retirement plan, a cash value insurance policy can offer tax benefits.
Life Insurance and Estate Planning
Life insurance is a crucial part of most estate plans. It can ensure that your loved ones get money without going through the potentially lengthy and sometimes expensive probate process, and it can solve cash flow problems caused by your death. In order to use your life insurance effectively for estate planning purposes, you need to structure the policy properly and be aware of various issues. Ownership of the policy, beneficiary designation, and tax consequences are all important factors to consider.
Life Insurance and Charitable Giving
Life insurance is a fantastic outlet for charitable giving. If you'd like to donate some or all of your money to charity when you pass away, you can do this by setting up a charitable remainder trust, or simply naming a charity as a beneficiary on your life insurance policy. I can help you set either of these up so that your worthy cause gets remembered after you're gone.