Jeffrey Manola is an experienced life insurance agent and the founder of Top Quote Life Insurance. His mission when he created Top Quote Life Insurance was to provide online consumers searching for life insurance with the absolute best quotes for term life insurance, permanent life insurance, no medical exam life insurance, and burial insurance. Not only does he strive to provide you with the ...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insur...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Nov 3, 2020

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Life insurance used to be thought of as only something older people needed to worry about. This thought is far from the truth. Thanks to further education and changes in how we discuss life insurance, more people know about the benefits of life insurance.

Now that more people understand the benefits of life insurance and how it can be used as a financial tool that can be tapped into even before death, more people are interested in getting a policy. This desire ranges from not only older individuals but to Millennials as well.

In this article, we would like to touch base on some of the lesser-known benefits that a life insurance policy can provide. Please keep reading to learn more about how you can make a life insurance policy work for you.

Looking to compare life insurance prices? We can help. Enter your ZIP code to get free quotes from multiple insurers.

Cover Death & Burial Costs

One of the biggest reasons families purchase life insurance coverage to make sure they’re spouse and children are not left with financial devastation after a loss of a loved one.

The funds from the death benefit of a life insurance policy can be used to make sure that the family can continue living their same lifestyle without any financial burden.

In addition to providing funds for a family to live off of, a life insurance policy can also cover expenses associated with death.

Covering death costs such as funeral expenses or even medical bills no picked up the health insurance could be covered through the benefit of having adequate life insurance coverage.

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Access Cash Whenever You Need It

If you have a form of permanent life insurance such as universal life or whole life insurance, your policy may have built up cash values.

In most cases, your cash value grows tax-deferred, meaning the money won’t be taxed if withdrawn, as it’s less than the total amount of premium invested into the life insurance coverage.

One of the many benefits of life insurance is that you can access the cash whenever you want for various times in your life. You can pay off debt, pad your retirement savings, pay for emergencies, or use it for a vacation.

Do keep in mind, each policy and type of permanent life insurance will offer different flexibility in what you can use your funds for.

Pay Estate Taxes

Depending on how much you’re leaving to your children when you die, your estate might face estate taxes. This generally is only a concern for very wealthy individuals.

If you’re married, the first $11.2 million of your estate can pass to your children without being taxed. If your estate will be more than $11.2 million, having a life insurance policy that pays out after your death can help your children pay the taxes on your estate.

Make a Charitable Contribution

Just as you can name a family member as a beneficiary of your life insurance policy, you can do the same with a charitable organization.

Some people choose to leave their life insurance policies to their favorite charity because they want to meet a final philanthropic goal. Others do so because they have no one to pass their estate on to.

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Cover Long-Term Care

According to a 2016 survey, many consumers are concerned about their finances after they retire. Sixty-six percent are concerned about having a comfortable retirement while 58% are concerned about paying for long-term care and medical expenses.

Having a life insurance policy can help ease the burden of costs after retirement. The wealth that you build in your policy can help pay for long-term care, medical treatments, or just add an extra layer of protection to your retirement funds.

Outside of cash value policies, there are now many life insurance policies that offer living benefits. Life insurance with a living benefit option can also provide funds to help pay for long term care expenses brought on by illnesses.

These types of life insurance policies are gaining significant interest and are considered to be less expensive than traditional long term care policy.

Less Restriction Than 401K

401Ks are a fantastic investment vehicle to help you save for retirement. However, when it comes to withdrawing the funds early, most people get a penalty.

The IRS tries to discourage savers from withdrawing cash from their 401K early by imposing a 10% early fee for people under 59.5 years old.

This can be detrimental to people who need cash now to pay for things such as medical emergencies or preventing getting evicted from a home.

Having a life insurance policy means you can access cash easier and without the penalty, you would incur from withdrawing from your 401K early.

Acts as Collateral

The cash value that accumulates in your life insurance account acts as an asset on your balance sheet as a house or car would. That means you can borrow money against the value of the account by making the life insurance policy collateral for the loan.

A life insurance policy can also be used in many business settings in which the lender requires you to purchase a policy to meet the requirements of a business loan.

In such cases, the life insurance policy would be collaterally assigned to the lender. Due to a sudden passing, the lender would be paid the balance of the outstanding loan.

Funds left over after paying the lender would then go to the primary beneficiary named on the life insurance policy.

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Locks in Your “Insurability”

Starting out early is the best course for several types of insurance including health and life insurance.

When you purchase life insurance early, you lock in your “insurability” while you are healthy and don’t have as many burdens. As your needs change, you can exchange policies to better meet your requirements.

Know All the Benefits of Life Insurance

There are so many benefits of life insurance that it almost doesn’t make sense to not get it. A life insurance policy is a financial tool that can help you grow your wealth to help you throughout your life, not just in death.

If you’re interested in discussing a life insurance policy with one of our agents, get in touch today.

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