20 Different Ways to Use a Life Insurance Policy, Part 1
Not only is shopping for life insurance overwhelming, but knowing how to use your policy can be equally overwhelming. Whether you choose a permanent or term life insurance policy, there are myriad ways to use either policy. Check out the first five ways you can use your policy and stay tuned to learn more!
1. Use Term Insurance for Personal or Small Business Loan
Many people need a personal or small business loan. Oftentimes, banks require you to have life insurance as collateral. Most commonly, insurers offer term policies that start with a 10 year term. However, a 10 year term may be too long of a period to insure a loan. For shorter terms, some insurers offer one year renewable policies or even five year terms.
To find the right term policy that meets your needs, reach out to one of our licensed agents today!
2. Use a Permanent Policy to Get Access to Immediate Cash Flow
On average, it takes about 12-15 years before you can take advantage of the cash value accumulation on your life insurance policy. However, you can borrow against it! If you borrow against your policy, you can choose to either pay the loan back to the insurer with interest, or you can have the amount deducted from the death benefits, which also includes accumulated interest.
Borrowing against your policy may have some potential tax disadvantages. Therefore, you should speak to a financial adviser here at Empower Brokerage!
3. Manage Your Chronic Illness with Permanent Life Insurance
In some cases, a permanent policy will enable you to access funds from your death benefits if you develop a chronic illness. So while you are still alive, you may borrow funds from your death benefit and use it for you medical expenses. However, in order to use your death benefit funds, your chronic illness must disable you to a certain extent as outlined in the terms of your policy, which varies from insurer to insurer.
4. Build a Tax Shelter with Permanent Life Insurance
Because of the cash value accumulation, many policies allow you to use life insurance as a means to invest. When the money is distributed to a certain portion of the permanent policy, the insurer invests it. Many companies provide a minimum amount of return no matter how well or poorly the market performs. Even better, the return you get on a life insurance policy is not subjected to taxes!
5. Permanent Policies Help Reduce Estate Taxes
A permanent life insurance policy can be used to both reduce estate taxes and cover estate taxes. To reduced estate taxes, the amount of your policy premiums are deducted from your estate, thereby reducing annual taxes. As for covering estate taxes, your beneficiaries will receive immediate tax free cash when you die so they can pay for both federal and state estate taxes without needing to liquidate assets!
Stay tuned to find out more ways to use your life insurance policy! Also, get with one of our life and financial experts today! They can help you choose a policy, or they can conduct a policy review to ensure that your current policy is still right for you!
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