Last updated on January 24, 2022
A life insurance policy is one of the most common forms of insurance people acquire. Life insurance plans are designed to pay the policyholder’s beneficiary a death benefit when they die. Financial professionals recommend taking out a life insurance policy to provide financial security to your spouse or other loved ones.
Although the purpose of a life insurance policy is to pay benefits after a person dies, there are many ways beneficiaries can use the money they receive. Policyholders can also use their life insurance policy when they’re still alive.
Obtaining Life Insurance
A life insurance comparison tool is an effective way to find a suitable life insurance policy. The comparison tool is free. It prompts users to supply information, including their names, gender, and age. Users must also answer some health questions. Users have the option of adding permanent disability coverage and trauma coverage. The tool generates a list of insurance plans that fit your needs, enabling you to compare your policy options.
Tax Benefits and Savings
There are several different types of life insurance policies, including term life insurance and permanent life insurance. A whole life insurance policy is one type of permanent life insurance policy, and you can use it to increase your savings. Policyholders can borrow money from their policy, enabling them to access tax-free funds. No restrictions limit how these funds can be used. A policyholder can borrow money for a downpayment to purchase a house, finance their child’s college education, buy a new car, travel around the world, or pay off loans. If the loan isn’t repaid, the policy’s death benefit will be lower, which may deter some policyholders from using these funds.
Death Benefits
The most common purpose of a life insurance policy is to pay a death benefit. When you pass away, your beneficiary receives the death benefit. Beneficiaries can include your spouse, dependants, family members, or friends. You may have a spouse who needs this money to pay off debts, cover your final expenses, or pay for their living expenses.
Cash Value
Many life insurance policies have a cash-in value. You can cash in your policy for its cash value. The life insurance policy is canceled, and your insurance company will not pay benefits upon your death. You can use these funds however you see fit. You may opt to start a business or use the funds to move to New York City. The cash value can also finance post-secondary studies. You can use the funds to train to become a registered nurse (RN) or a licensed practical nurse (LPN). Both LPNs and RNs provide patient care, and their job descriptions have some overlap. They may check a patient’s vital signs, change bandages, and update patient records. The qualifications for these occupations differ, however. An LPN may only need to complete one year of postsecondary training, while RNs need to complete between two and four years of postsecondary studies. RNs and LPNs must be licensed. An individual working as an LPN may opt to use the cash value of their life insurance policy to continue their studies and become an RN.
Life Settlement
You can opt to sell your policy under the terms of a life settlement. Any policyholder can pursue a life settlement. A life settlement broker finds a buyer who pays a lump sum of cash for your policy. The buyer appoints a new beneficiary and assumes responsibility for any outstanding policy payments. You’re free to use the funds for any purpose you choose. Life settlements pay more than the cash value of your insurance policy.
Viatical Settlement
Individuals who are terminally or chronically ill can opt to pursue a viatical settlement. A viatical settlement is similar to a life settlement, with two clear distinctions. Policyholders must have a life expectancy of two years or less to qualify for a viatical settlement, and viatical settlements pay more than life settlements. The funds can be used to pay for your final arrangements, discharge debts, or cover the cost of medical treatment. You may need to seek a qualified LPN to provide in-home care. You may also pay for a family member to train, so they have the LPN skills needed to provide you with expert care.
You can use life insurance to provide a financial security net for your spouse, dependents, or other family members. Life insurance can also be used to save money or provide tax-free access to emergency funds. Policyholders can use funds from life or viatical settlement in any way they choose.
