Life insurance is an important investment for anyone in the Naples area and can serve a variety of purposes. As we discussed in our last blog, we saw how a life insurance retirement plan, also known as a LIRP, can be a purposeful tax-deferred investment much like the Roth IRA. Life insurance can function as a means for covering expenses during your life, those after your life, or both. The cash value available with some policies is a part of your investment that can be used now or later. Today, on our blog, we are going to be covering when and how you can use the cash value of your life insurance policy.
What is Cash Value?
Before we continue, we need to address what cash value is. Cash value is a lump sum of money that is built into several types of life insurance policies; it is usually a tax-sheltered investment that can be used during your lifetime or given after your death as a part of the death benefit. Whole or permanent life insurance, as well as variable life insurance, and universal life insurance all come with a cash value; term life insurance normally does not. For this reason, many opt for whole life insurance or to convert their term life insurance into a whole life policy.
What Can I Use It For?
You can use the cash value of your insurance policy for a variety of purposes. However, you must use it before you die. If you fail to use it or repurpose it, the insurance company gets the cash value when you pass away. Below are some ways that you can use your cash value so your hard earned cash and investment does not go to waste.
Add to the Death Benefit
Instead of losing the cash value of your policy, you can put it into your death benefit that will go to your beneficiaries when you pass away; you can further provide for those loved ones you leave behind. Though you must request this transaction to occur, most insurance companies will approve the request.
Pay for Premiums
You can also use the cash value that you’ve accumulated over the years to pay for the premiums of your policy later. Doing this is called paying up. Some consider this when they must continue to pay insurance premiums well into retirement.
To learn more about using the cash value of your life insurance policy, stay tuned for part two of this short blog series. Interested in a life insurance policy? Contact Napels Life Insurance & Annuity Advisors! Visit our website to learn more our trusted financial advisor in Naples and schedule an appointment today!