5 lesser known benefits of life insurance
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Key takeaways:
- Life insurance policies often include secondary benefits that many people, even policyholders, aren’t always aware of.
- In some cases, policies can be used to help pay for long-term care, medical bills, or disability income.
- You may be able to borrow against your life insurance to help supplement your retirement
You're careful about your family’s financial health, so you’ve purchased life insurance to help ensure your loved ones will be taken care of. But life insurance policy benefits can extend beyond this main purpose. In fact, you may even be able to capitalize on your plan right now. Read on to learn about five lesser-known benefits of life insurance.
1. Providing disability income
We all face the possibility of being temporarily unable to work at some point in our careers. Fortunately, if this does happen, your life insurance plan may be able to help. You can add a rider to some policies that can provide you with a monthly stipend if you’re unable to work. These riders are sometimes used in lieu of long-term disability coverage and may include the ability to waive payments until your disability is over. This can help prevent the policy from lapsing, and you can resume paying once you’re back to work.1
2. Paying for long-term care
Similar to disability, you may be able to use your life insurance to help cover long-term care expenses. This type of benefit is traditionally added via a rider as well and may also cover costs for home health aides. Planning for possibilities like these may be a smart financial move, and can also give your family reassurance.2
3. Providing living benefits
If you’ve purchased a term or permanent life insurance policy, there’s a strong likelihood that you can use a portion of the death benefit as a living benefit. This gives terminally ill individuals the ability to receive part of their payout while they are still alive. People often take advantage of this option when they have significant medical bills that need to be paid.3
4. Retirement income
You might be surprised to learn that a life insurance policy can be used to help supplement your retirement. If you choose to purchase permanent life insurance, you may be able to borrow as a loan or withdrawal against it as the policy holder. Most permanent policies have the potential to accrue “cash value” over time, and that money can be withdrawn or loaned to support as an additional source of retirement income – or you can borrow against it to help cover unexpected expenses in an emergency. It’s important to keep in mind, though, that if it comes time to pay the death benefit on the policy before the loan is repaid, your beneficiaries will receive less than you originally planned for them.4
5. Making a charitable donation
Most people might not immediately equate a life insurance plan with philanthropy, but your policy can aid a charity you care about. Rather than leaving money in your bank account and earmarking it for an organization in your will, you can use some of those funds to purchase a permanent life insurance policy that may enable you to ultimately make a larger donation.5
Life insurance is designed to protect your financial health in more ways than one. It’s worth looking into the different options a life insurance policy offers so that you know all the ways you and family might benefit.
Citations:
1 Policygenius: “What are the benefits of life insurance?” by Logan Sachon & Rebecca Shoenthal, November 19, 2020 https://www.policygenius.com/life-insurance/what-are-the-benefits-of-life-insurance/
2 Forbes: “How To Use Life Insurance To Pay For Long-Term Care” by Cameron Huddleston, July 20, 2020 https://www.forbes.com/advisor/life-insurance/long-term-care-hybrid/
3 U.S. News: “10 Things You Didn't Know Life Insurance Could Do” by Maryalene LaPonsie, May 20, 2016 https://money.usnews.com/money/personal-finance/articles/2016-05-20/10-things-you-didnt-know-life-insurance-could-do
4 Investopedia: “Life Insurance Guide to Policies & Companies” by Amy Fontinelle, June 26, 2020 https://www.investopedia.com/terms/l/lifeinsurance.asp
5 U.S. News: “10 Things You Didn't Know Life Insurance Could Do” by Maryalene LaPonsie, May 20, 2016 https://money.usnews.com/money/personal-finance/articles/2016-05-20/10-things-you-didnt-know-life-insurance-could-do
Loans and withdrawals will reduce the death benefit, cash surrender value, and may cause the policy to lapse. Lapse or surrender of a policy with a loan may cause therecognition of taxable income. Policies classified as modified endowment contracts may be subject to tax when a loan or withdrawal is made. A federal tax penalty of 10%may also apply if the loan or withdrawal is taken prior to age 59 1/2.Optional riders may have additional fees and expenses associated with them.
Insurance products are issued by: John Hancock Life Insurance Company (U.S.A.), Boston, MA 02116 (not licensed in New York) and John Hancock Life Insurance Companyof New York, Valhalla, NY 10595.
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