Have you ever wondered why life insurance is such a widely used tool in financial planning? It is a versatile method of addressing funding, growth, and taxation needs.
We have seen many uses for implementing a life insurance strategy. Below you will find some of the most common uses we see at Quotes Parade:
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1) Pay Off A Mortgage
Mortgages are one of the largest debts you leave behind for your family to handle. By obtaining a life insurance policy you can assure this will not become a burden to your loved ones when you are gone. Young homebuyers are often counseled to purchase term life insurance to cover their mortgage. Mature homeowners may look to life insurance to assure that the fixed income of retirement will still be adequate should their partner pass.
2) Fund A College Education
When a primary income is lost, funding higher education becomes very difficult. With the average cost of private tuition being $32,405, it can be a challenge for families to afford this, even with scholarships. Should the household breadwinner die, college may no longer be an option. Life insurance can assure that funds are available when a child is of college age or carrying student loan debt. Parents often use life insurance to provide peace of mind when taking on student loan debt. Grandparents often take a policy, or use their will to gift a portion of a policy to support the grandchildren they leave behind.
3) Absolve Credit Card Debt
Unlike student loans or mortgages, credit card debt is often referred to as “bad debt” as it is difficult to clear and will continue to grow. Leaving behind credit card debt for you spouse or children to address may not seem avoidable but with life insurance, it can be. Even an inexpensive term policy can provide protection against passing debt to the next generation.
4) Relieve The Burden Of Final Expenses And Burial Costs
One of the first and most basic uses of life insurance is to cover final expenses such as burial, cremation, and services. While your family is busy planning your life celebration and grieving over its loss, managing costs and finding a way to fund services should not weigh on them.
5) Make A Charitable Donation
Whether to a local charity, public television, or an organization which you are passionate about, all not-for-profits appreciate and rely upon charitable gifting. Life insurance is often an inexpensive way to provide funds to an organization.
6) Receive A Guaranteed Return On Your Investment
With the ever evolving turmoil in the stock market, permanent life insurance remains a way to generate steady economic growth. While the returns are not usually as great as the potential for growth in stocks, the risk of loss is usually much lower. Of course, this depends on the type of policy. We recommend involving your financial planner in discussions with us regarding potential returns.
7) Avoid Estate Tax
While not everyone will be subject to estate taxation, life insurance remains the best method for addressing estate taxation. Policies can be created to provide funds to cover the estimated tax exposure AND policies can be held in trust with the policy premium helping to “pay down” the estate and lower the taxable exposure. As always, we recommend that your financial advisor assist in the discussion of planning for estate taxes with your life insurance.
8) Leave A Nest Egg
You do not need to have a planning objective. Sometimes, life insurance is simply used to grow family wealth.
9) Plan For Long-Term Medical Expenses
Life Insurance can be used in two primary ways to address medical expenses. The first, to assure a lump sum of money is available to pay for medical costs incurred prior to death. The second, is by triggering an accelerated benefits rider and having the policy begin paying for expenses while undergoing treatment.
10) Assure Continued Care For A Disabled Family Member
Thinking about who will care for your special needs child after you are gone is a stressful conversation. What is even more stressful is not having enough a plan to cover your child’s lifetime of incurred costs. Life Insurance will assure your child has the necessary funds.