If you've ever wondered if life insurance can play a crucial role in your family’s broader financial plan, you’ve come to the right place.
I get questions all the time from people looking for creative ways to use life insurance.
Here’s a good one: charitable giving. A relatively small life insurance policy of, say, $50,000 would not cost much for most people but would be a very large gift for most charities.
That’s just one example of how you can be creative with life insurance as a part of your personal finance journey. This article explores many options and benefits of life insurance options, some you know and some you might not know.
I hope this article helps get your creative juices flowing!
1. Protect Your Growing Family with a Term Life Insurance Policy
Picture this: You're in the exciting phase of life with young kids. Maybe a pet or three. Everyone is healthy, but you know there’s a chance a hiccup can happen at any time. Term life insurance is your go-to.
This is how it works:
You can purchase a 20-year term policy to ensure major expenses like mortgage, college tuition, daily living expenses, credit cards, and yes, even vacations are covered when you’re gone. It is a straightforward solution that provides a safety net for your family's financial future while the kids are at home.
2. Stabilize Your Estate Plan with a Permanent Whole Life Policy
Here’s a stressful scenario for business owners. Your business is good, even great sometimes, but in the back of your mind, you worry about how things will be after you die. What you don’t want is your family’s financial health tied to a business that just lost its leader.
There are many types of permanent life insurance policies. The most well-known type of permanent policy is whole life insurance, and it is often used in business and estate planning. Whole life insurance policies build cash value you can use while you are alive and can be passed to your heirs when you die, along with the life insurance lump sum death benefit.
The proceeds can also be used for estate taxes. Paying for taxes will save your heirs a significant amount of money. And, in most cases, proceeds to heirs are income tax-free.
Premium payments for whole life are typically higher than term.
3. Flexible Options with Universal and Variable Universal Life Insurance
If you are looking for a little more risk and potential upside with your life insurance as part of your financial goals, this type of policy is a great place to start. You can adjust your premiums and the policy’s death benefits as your financial situation changes.
Think of it as the chameleon of insurance policies – adapting to the policyholder’s needs.
4. Leverage Market Growth with Variable Life Insurance
Variable Life Insurance offers a unique blend of protection and investment opportunities, perfect for individuals looking to be more active in the management of their financial tools. One of variable life’s key features allows you to invest in options such as stocks, bonds, and mutual funds. Cash value is tied to market performance rather than a fixed interest rate. It’s perfect for someone comfortable with more risk to get more upside.
5. Get a Two-Fer With Variable Universal (VUL)
But wait, a VUL offers even more flexibility and customizability. It is one of the most flexible of all permanent life insurance policies. A VUL product combines the best of variable life with the best of universal life.
This is a great product for entrepreneurs and individuals open to higher-risk options. You can allocate premiums to a variety of investment options while at the same time adjusting the death benefit and premiums over time. Now that’s control! Your cash value is tied to the performance of the investments you chose.
If the market doesn’t perform as you expected, the policy’s cash value can be used to cover premiums.
6. Final Expenses Covered with Burial Insurance Payout
Let’s face it: funerals are not getting less expensive. Burial insurance, sometimes called final expense insurance, will cover all your funeral expenses and can also be used to settle debts or other expenses. Burial insurance provides financial support at a time when your family’s stress levels are at their highest. This life insurance coverage is a last gift to your loved ones they won’t forget.
7. Guaranteed Issue a Great Option With Health Problems
Sometimes life throws us curveballs. If you have ever been turned down for life insurance because of health issues, this may be a good option for you. Guaranteed-issue policies don’t require a medical exam or ask you questions about your health. This is perfect for those with pre-existing conditions.
Be aware you will likely pay higher life insurance premiums and may have lower coverage options. This is a hassle-free way to secure coverage and provide peace of mind at a time of uncertainty.
8. Charitable Giving Through Life Insurance
Feeling philanthropic? You can use life insurance as a tool for charitable giving. By naming a charity as a beneficiary, you leave behind a legacy that continues to make a positive impact in the world.
There you have it – eight ways life insurance can be your financial superhero. Remember, each person's situation is unique, so it's essential to tailor your insurance plan to fit your financial needs and those of your dependents.
Buying life insurance can be complex, so I always recommend folks sit down with either a licensed insurance agent, financial professional, or financial advisor to make sure you get the straight scoop on your options.
With a little bit of elbow grease and time, I know you can make life insurance work for you!
