Life insurance isn’t something that many people like to talk about—because it brings to mind worst case scenarios. But did you know that life insurance has plenty of other uses aside from providing loved ones with income replacement after you pass away? This is especially true if you have a permanent life insurance policy. A permanent policy gives you greater flexibility than a regular term life policy in terms of planning, and there is the added advantage of having a cash value accumulation portion which grows over the life of the policy.
Here are four creative ways you can benefit from your life insurance while you’re still alive:
1) Get Help in the Face of a Traumatic Injury or Terminal Illness.
Life is unpredictable and it’s nice to know that if you get injured or are diagnosed with a chronic illness, your life insurance benefits can help.
Say you’re a member of the military and are severely injured in the line of duty. The severe injury benefit from your USAA Life Insurance Company term policy can aid in paying for your recovery! Take a solider wounded in Afghanistan, for example, who used his $25,000 benefit for a down payment on a home near the hospital where he did his rehabilitation.¹
Many permanent policies will allow you to use a portion of the funds from your death benefits to help pay for medical expenses, should you develop an illness. To get this assistance, you must be ill to a degree that incapacitates you, as sufficiently defined in the terms outlined by the policy. This can vary from insurer to insurer.
2) Put the Cash Value Toward Starting a Business.
It can be tricky to find investors or enough startup funding to help you get a new business off the ground. And lenders may be hesitant to approve your loans if you aren’t generating revenue. However, if you dream of being an entrepreneur and have built up the cash value feature in your permanent life insurance policy, you can always borrow that money to help jumpstart your dream business.
3) Fund College Tuition or Pay Off Debts.
If you are saving up for a child to go to college or looking for ways to pay for your own schooling, you might be interested in using the cash value accumulation portion of your life insurance to help with those costs. You can withdraw cash from your policy to fund college tuition or to pay off a debt, like a credit card or a car! Just be aware that the money you take out may be subject to tax ramifications and a reduction of the death benefit portion of your policy.
4) Reduce Your Estate Taxes.
When you have a permanent life insurance policy, you can use it to either reduce your current estate taxes or completely cover them in the event of your death. Reduce them and the amount of premiums are deducted from your estate to lower your annual taxes. Choose to cover them and immediate tax-free cash will become available when you die, so that your beneficiaries can take care of both federal and state estate taxes without having to liquidate assets.
There are more ways that life insurance can help you and your family before and after your death. Discussing your financial goals with a life insurance agent can help you land on the policy and benefits that are right for you.
To get started, check out USAA’s Life Insurance Needs Calculator here.²
¹Military Severe Injury Benefit is available to active duty in the United States Armed Forces and United States Armed Forces Reserve. Provides $25,000 to help with the expenses in the event of certain injuries while performing military duties. These injuries include dismemberment and loss of limb function, such as paralysis; loss of vision; and severe burns, as long as base policy is in effect. Rider Form LBR67140ST 05-07 (may vary by state); NY Form NBR67175NY 06-07. Included at no additional cost.
²This calculator is a self help tool. You should enter figures that reflect your individual situation. This information is provided for illustrative purposes only. The above life insurance needs estimate is based in part on the age and information you entered and results may vary depending on your individual circumstances.
Military Protection Plus is level term life insurance. Initial life insurance coverage limited by rank and occupation. Level Term V: Coverage is level for the duration of the policy. Premiums remain level for the duration of the Initial Benefit Period, then increase annually while benefits remain the same. Form LLT49045ST 01-05 (may vary by state). In New York, New York Term Series V: Form NLT45861NY 01-04. Military Severe Injury Benefit and option to increase coverage to replace SGLI provided by riders. Increases in coverage require payment of additional premium. Rider Forms LBR57939ST 05-06 and LBR67140ST 05-07 and ICC1497953 03-14 (may vary by state). In New York, Forms NBR97955NY 03-14 and NBR67175NY 06-07 and NBR60468NY 06-06. Availability of increased life insurance coverage depends on characterization of military separation. Call for details on specific policy costs, benefits, limitations and availability in your state.
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