Life insurance protection is, without question, one of the most unusual financial tools ever developed. A policy lets you create an estate to help protect and sustain your family and/or business following your death. But life insurance does so much more than simply give financial security in the form of a tax-free death benefit. You can also tap into the benefits of permanent life insurance while you are still alive.
Most importantly, life insurance provides your heirs and/or business immediate cash at death when it is needed the most. The tax-free death benefit can be used to pay final expenses, estate taxes, legal and administrative fees or cover unpaid medical costs. Financial resources provided by life insurance can eliminate the need to sell your home or appreciated assets, or go into debt to cover these costs. In many cases, assets sold to meet financial obligations receive less than their market value.
A Tax-Advantaged Savings Alternative
In addition to providing an income tax-free death benefit for the protection of heirs or your business, life insurance can also provide you with a systematic way to accumulate assets. Permanent forms of insurance generate tax-deferred growth potential that can be excellent alternatives to other commonly used savings strategies. Probably the biggest benefit of using life insurance to accumulate assets is that it’s self-completing. If, because of your premature death, you aren’t around to achieve your accumulation objectives, the policy’s death benefit does it for you.
Living Benefits for You
Once you’ve built up your policy’s cash value, you can borrow or withdraw from it to pay for various expenses. One common personal use of accumulated cash values is additional retirement income. Because you can borrow from your cash value income tax-free*, it makes an excellent supplement to social security or other savings you may have. Of course, any policy loans will reduce the final death benefit payable to your beneficiary. A second common use of cash values is as collateral to obtain credit.
Living Benefits for Your Heirs
Most people don’t purchase life insurance for themselves – they purchase it to provide “living benefits” to their heirs or to help support their businesses. For example, life insurance proceeds are often used:
- to repay outstanding mortgages
- to create funds for college expenses
- to help enhance or ensure a surviving spouse’s standard of living
- to assist in effecting a smooth transition of a business to heirs or associates.
Competitive and market forces have brought about many and creative changes to life insurance over the years. Today, whether you need term or permanent protection, fixed or adjustable premiums, or individual or joint coverage, you can rest assured there’s a policy available that is designed to fulfill your specific objectives.
The Advantages Are Clear
Life insurance protection can be an important element in your risk management program. A life policy provides a foundation of financial security for you, your family, your associates, and your business.
Talk to a licensed professional today to see what type of policy is right for you.
All guarantees are based upon the claim-paying ability of the issuer.
*Accessing cash values may result in surrender fees and charges, may require additional premium payments to maintain coverage, may reduce benefits, and will result in a reduction of policy value.
** As long as premiums are paid and the policy doesn’t lapse. Assumes contract is not a modified endowment contract under IRC §7702A.
Content prepared for compliance through Penn Mutual.
© 2017 The Penn Mutual Life Insurance Company, Philadelphia, PA 19172 www.pennmutual.com