The Benefits of Life Insurance Beyond the Death Benefit

You’re likely aware of the importance of life insurance for providing financial aid to your loved ones should you pass away. But while life insurance may often be viewed solely as a financial safety net for beneficiaries in the event of your death, advantages can extend far beyond the direct death benefit payout.

Additional Benefits of Life Insurance

In addition to the direct payout, which your loved ones can submit a claim for following your passing, purchasing and maintaining a suitable insurance policy may also garner the following benefits:

• Cash value accumulation—Certain types of life coverage, such as whole or universal policies, have a cash value component that grows over time. This value can be invested or used to help pay premiums. Essentially, it acts as a savings account that can be accessed during your lifetime.
• Policy loans—Policyholders can take out loans against the cash value of their life insurance policies. These loans can be used for various purposes, such as funding a child’s education or covering unexpected medical expenses. The interest rates on policy loans are often lower than those of traditional loans and repayment terms can be flexible.
• Tax advantages—Life insurance policies offer several tax benefits. The death benefit is typically tax-free for beneficiaries, and the cash value growth in permanent life policies is tax-deferred. Additionally, policy loans are generally not considered taxable income, making life insurance a tax-efficient financial tool.
• Estate planning—Life insurance can be crucial in estate planning. It can provide liquidity to cover estate taxes, ensuring that your heirs do not have to sell off assets to pay these expenses. This can be particularly important for individuals with significant estates or illiquid assets, such as real estate or family businesses. Supplemental retirement income—The cash value in a permanent life policy can be used to supplement retirement income. Policyholders can withdraw or borrow against the cash value to provide additional funds during retirement, offering a flexible financial resource.

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Contact Academy West Insurance today to learn more about the benefits of the right policy or compare personalized life insurance quotes.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.