Life insurance is generally viewed concurrently with the death benefit it provides – the money paid out to the policyholder’s family members in the event of his/her death. However, permanent life insurance is beyond just this.
Permanent life insurance offers lifetime protection and provides financial security to the dependents or beneficiaries, in case of the policyholder’s demise (subject to timely premium payments and no misrepresentations in the application process). Additionally, permanent life insurance accumulates sizable cash value and can be leveraged as an advanced financial planning instrument.
A permanent life insurance policy’s accumulated funds can be capitalised upon and directed towards several significant living benefits to fund critical financial demands. Here are some things you probably did not know your permanent life insurance policy could do:
Amongst other uses, one can borrow against the cash value that a life insurance policy accumulates over time and use it to pay for any kind of secondary education, including college. The funds can be accessed with utmost ease without the need to apply for bank loans or go through other financial formalities. It is however advisable to have a word with a financial advisor before tapping into the policy’s accumulated cash value to check the extent to which it will affect the death benefit.
Banks are usually hesitant to lend money to businesses that are not generating sufficient revenue. As a result, new entrepreneurs need to fund their businesses themselves – either from their personal savings or by borrowing from family/friends. Borrowing from the accumulated cash value of one’s life insurance policy is an often overlooked, but a good source nevertheless, to fund a budding business.
Tending to unavoidable family commitments
Taking time off work to tend to one’s aging parents is not something everyone can afford to do, quite literally. However, one could be financially prepared for this kind of a situation to some extent by tapping into their life insurance policy’s accumulated cash value, as it serves as a temporary financial backup.
Emergency cash could be needed for a whole range of reasons – debt settlement, saving up for child education, saving for children’s future needs, funding medical treatment, funding retirement etc. In any of these cases, one can take a loan from their life insurance cash reserves. The icing on the cake is that this cash value loan is tax-free.
The safety provided by a life insurance policy encourages the adoption of an aggressive allocation strategy towards one’s retirement investments. Further, since one can tap into the cash value of their insurance policy to cover the first few retirement years, the retirement investment funds can be allowed to grow for a longer period.
With so many riders to pick from and some at no additional cost, it makes sense to clarify with the insurance agent about all included riders when purchasing a life insurance policy.
Life insurance is more than just being a death benefit pay out channel. It is best to discuss with your professional financial advisor or insurance agent/company to understand how you can leverage the living benefits of your life insurance in line with your specific needs and situations.