6 Ways Life Insurance Can Benefit You
When you list the financial assets on your balance sheet,
you might think immediately of your house, vehicles, retirement funds or
financial investments. Another essential element in your financial plan, your
life insurance, offers benefits that other assets don’t.
The Added Value of Life Insurance
Beyond the familiar death benefit, permanent life insurance
has several valuable advantages that can both expand and protect your financial
security. Here are some of the additional opportunities life insurance can
offer:
1. Access to Cash. Once it accumulates, your life insurance
cash value is accessible through policy loan or withdrawal for family and
business opportunities, education funding, retirement income, emergencies, or
to pay policy premiums.¹
2. Asset Protection. Life insurance can offer a financial
fall-back when needed and offset the impact of estate taxes upon your death.
The death benefit also can provide surviving family members with funds they
need to live comfortably and help achieve their goals.
3. Consistent. Safe Accumulation. Permanent life insurance
cash values are guaranteed, meaning you will always have access to the assets
you accumulate.
4. Flexibility with Less Restriction. You can access your
accumulated cash value without restrictions that exist on other assets. For
example, there are no penalties or required minimum distributions, unlike other
tax-favoured investments such as IRAs and 401(k) plans.
5. Long-term Financial Security for You and Your Family.
Once you have built cash value over decades, you have multiple options for
accessing those funds. You can cash in the policy, convert it to an annuity for
guaranteed lifetime income, keep a portion of the death benefit and access some
of the cash value, or continue the policy to protect your family and leave a
legacy.
6. Protected Insurability. As long as premiums are paid,
permanent life insurance provides coverage throughout your life, even if health
or personal situations change. And buying a policy at a young age locks in
insurability.
With so many unique benefits, permanent life insurance can
be a strong addition to your balance sheet and the foundation for your
financial security.
¹ Each method of utilizing your policy’s cash value has
advantages and disadvantages and is subject to different tax consequences. Surrenders
of, withdrawals from and loans against a policy will reduce the policy’s cash
surrender value and death benefit and may also affect any dividends paid on the
policy. As a general rule, surrenders and withdrawals are taxable to the extent
they exceed the cost basis of the policy, while loans are not taxable when
taken. Loans taken against a life insurance policy can have adverse effects if
not managed properly. Policy loans and automatic premium loans, including any
accrued interest, must be repaid in cash or from policy values upon policy
termination or the death of the insured. Repayment of loans from policy values
(other than death proceeds) can potentially trigger a significant tax
liability, and there may be little or no cash value remaining in the policy to
pay the tax. If loans equal or exceed the cash value, the policy will terminate
if additional cash payments are not made. Policy owners should consult with
their tax advisor about the potential impact of any surrenders, withdrawals or
loans.
The North-western Mutual Voice Team is a group of
professionals who share insights and opinions from experts and industry leaders
across the enterprise. Our vision is to inspire others to take action and plan
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