You are probably aware that life insurance policies pay out a cash settlement upon the death of the policyholder. However, you may be unaware of the variety of ways life insurance policies can be used. Here are four ways you may be able to use your life insurance policy.
Extra Cash
Some insurance policies build cash value. This accumulated cash value can be used in several ways. If you no longer want or need the policy, or need some cash to cover an unexpected expense, you may wish to consider a life settlement. This option allows you to transfer your policy to a new owner in exchange for a lump sum settlement. Selling your policy in this manner provides you with money to spend. It also relieves you of your obligation to make premium payments on the policy.
Another way to turn the accumulated value in your policy into cash is to borrow against it. Your life insurance company may allow you to take out a loan. Then you either repay it with interest to the insurance company or have it deducted from the death benefit payment of the policy.
Some insurance companies may offer a rider to your policy. This allows you to collect the death benefit of the policy while you are still alive. But, you meet the conditions of the rider.
Pay Your Final Expenses
It seems like everything costs money, even dying. Most people will leave behind a bill for the cost of their funeral or cremation. Additionally, you may have unpaid medical bills or other outstanding debts that will need to be paid out of your estate. The proceeds from your life insurance can be used to pay those expenses.
Build Your Legacy
If leaving something of monetary value to your children or grandchildren is important to you, a life insurance policy can help you supplement the value of your estate. You get to choose who will receive what from the proceeds. This can be particularly useful if your goal is to divide your assets equally among your heirs. Some of those assets are not easily divided up. Instead of forcing your heirs into selling the property they may wish to keep, you can give the property to an heir. Another heir can collect the other cash from your life insurance policy. If you choose, you can further enhance your legacy by naming one or more of your favorite charities as beneficiaries. You may use all or part of the proceeds from your death benefit as a charitable donation.
Replace Your Income
Life insurance policies can provide peace of mind, that when you pass away, your family will still have financial security. The death benefit from your policy can be used to replace your income for your family’s everyday expenses, the mortgage on their home or even college tuition.
Whether you already have a life insurance policy or are considering purchasing one, you need to be aware of all the potential uses of your policy. Your policy can not only protect your family after you die but provide value to you while you live.
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