The Secret Benefits of Life Insurance

Photo by James Wheeler on Unsplash.

We tend to think about life insurance as a rare-to-pull ripcord—a plan set in place for the worst of worst-case scenarios. But life insurance can do a lot more for you and your loved ones than you think! In this article, we’ll cover the obvious and not-so-obvious benefits of having a life insurance plan.

The Bell Tolls for Thee… But Softer

For starters, let’s recap the most obvious benefit: in the event of your death (something that is 100% guaranteed to happen), life insurance provides the people you leave behind with a lump sum payment to settle your debts, cover your funeral arrangements, make rent, pay off your house, car, appliances, bills, etc. The idea is to help your loved ones have as easy and well-resourced a life as possible after you’re gone. It’s a given: having a death in the family is hard enough without having to worry about bridging the financial gaps that used to be covered.

A really important sidebar with that lump sum payment— if you have the right life policy, it won’t be taxed before it lands in your family’s hands. This perk is known as a tax-free death benefit, and it further safeguards your beneficiaries from the unnecessary financial blows of federal and state income taxes. If the government took out a large chunk of the relief money your loved ones needed, it would nearly defeat the purpose of life insurance, right?

Cash Value Accumulation

Many people fail to realize that certain life insurance policies grow in value over time. They mistakenly think of their life insurance policies like other insurance policies— when something goes wrong, you make a claim, and the company pays you money to pad the ride. It’s a one-and-done deal. While some life policies are like that, others function more like 401(k) and Roth IRA accounts (or even some basic savings accounts). As the years go by and you continue to pay premiums into the policy, the “cash value” of the policy grows. The growing cash value can have compounding interest and/or may be invested out by the company you purchase the plan with, so there’s a good chance you’ll be sitting pretty with quite a lot of money saved up inside the plan later in life. And you didn’t have to do anything extra! Just keep the plan over time.

The cool part about saving money within a life insurance policy like this rather than a 401(k), for instance, is that you can withdraw funds from it without huge penalties, tax consequences, or bad interest rates, essentially borrowing money from yourself. You can use that money to make your retirement more comfortable, send a child or grandchild to college, rebound after an emergency, or whatever!

Will Power

You can use your life insurance as an estate planning tool. An estate plan is a plan you make saying how you would like the things you own to be distributed after you die. The value of your life insurance policy can be woven into your estate plan to make sure that any taxes owed on your belongings are paid off and attorneys involved in the distribution process receive compensation (it takes a lot of legal heavy lifting to dole out a dead person’s wealth), and your heirs get what you want them to get. You can even use the value of your life insurance policy to equalize inheritances if there are issues with the equity of your distributions.

For a very simple example, let’s say you have two kids, and you’ve written in your will that you’d like to divide your assets equally among them. However, only one of your children can have the family house, making their inheritances vastly different. In this case, you can give one child the house and the other the money you accumulated within your life insurance policy to help even out their gifts. That way, your wish to give equal shares of your wealth can be honored, and no hard feelings form between siblings. You’d be protecting your family and their dynamic for years to come.

Living with Illness and Disabilities

Some life insurance policies come with “living benefits,” meaning that if a contingency occurs during your lifetime that puts you and your family in dire financial need, you can receive help. For example, if you are diagnosed with a chronic or terminal illness or become disabled and you have the right policy in place, you’ll receive money from the insurance company while you are still alive to help absorb the impact of that challenge.

Stay Open for Business

America is a nation of business owners. According to this article, just over ten percent of the U.S. workforce is self-employed. If you’re one of them, you can use special life insurance policies to pay the way for your business after you die, ensuring it outlives you. These policies can unbury businesses from debt, cover employee salaries, pay for building leases and other bills, and see that the vocational legacy you worked your entire life to build ends up in capable hands.

You Can’t Buy Happiness… But Maybe You Can Buy Peace

The benefits of stressing less can’t be overstated. Planning for faraway future ifs and whens—heck, even looking ahead just one day can be extremely stressful and emotionally expensive. The good news is that you can find safety. The financial world is forever stormy, and while you could be braving the worst, it helps to know that everything you care about is held behind a strong shield arm. Suffice it to say that perhaps the most underrated benefit of life insurance is that it will help you actually enjoy your life knowing that your death endangers nothing.

While life insurance is typically associated with death benefit protection, its advantages extend far beyond that. From providing financial security to loved ones to serving as a tax-efficient investment and estate planning tool, life insurance can help you no matter what your life looks like—be it tragic or comic, disastrous or clear-skied. Because even if everything goes according to plan and you die after living a long, happy, healthy life, you still need something to help keep that plan in place. After all, we live forever in what we leave behind.

Life Insurance Questions?

We hope that this information on secret life insurance benefits has been helpful!

Did you know that the earlier in life you get a life insurance policy, the more benefits you and those you love will have access to?

If you’d like to learn how we can help you plan for the future, call Empower Brokerage at (888) 539-1633 to speak to one of our Life and Annuity experts or leave a comment down below.

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About Cristin Dickey

Born in Maryland, raised in Texas, and educated in Utah, Cristin is a purveyor of stories from all widths and walks of life.  With a background in filmmaking and a staunch passion for literature, she aspires to give digital spaces a uniquely human touch.

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