Life insurance is a benefit that most people know they should have but hope they never need. What many people don’t realize is that the death benefit is only one of several ways that life insurance can be used. An insurance policy can also be helpful in other life situations that call for extra financial resources. Aware Insurance wants to help you establish a solid safety net, so here’s what you need to know.
Applying for Insurance — What to Expect
Part of understanding how life insurance works includes getting to know what’s involved when applying for a policy. Many people worry about the medical information that’s required, but the medical component is just one way that an insurer helps determine the rate for your policy.
As Value Penguin explains, a blood test is used to look for an increased risk of certain health problems, such as high blood pressure, high BMI, high cholesterol, and glucose levels. The blood test also checks for tobacco and drug use. This information helps the insurer assess your overall health; if you’re in good health, you may be able to qualify for lower premiums.
Along with completing the blood test, be prepared to provide some other vital information as part of the application process. This typically includes designating beneficiaries, indicating whether you have any other life insurance policies, and answering some non-health-related questions. Having all of this information on hand helps make applying for life insurance simple and easy.
Life Insurance Benefits — Protecting Your Financial Future
Once your policy is in place, make sure you’re familiar with what it offers, including the financial benefits you may be able to access. Perhaps you’re budgeting for a downsize, or assessing your ability to afford long-term care. These are just some of the ways that you and your family members can benefit from your policy other than the death benefit.
Selling Your Policy
If you reach a point where you no longer need the death benefit but could use an additional source of income, one option is to sell it. When you sell a policy, you receive cash in an amount that is less than the death benefit but more than what you would get if you surrendered the policy. Some people choose to sell their policy later in life to supplement their retirement income or help pay for medical expenses. Also called a life settlement, selling a policy can be helpful if you have a costly medical diagnosis. One thing to keep in mind is that selling life insurance is most frequently used by individuals who are over age 65 or have a terminal diagnosis.
However, there is a way to sell part of your policy and still receive the death benefit upon your passing. For example, you could sell only a portion of the death benefit and receive a lump-sum cash payment while retaining the rest of the policy. By doing so, the buyer of the policy will take care of the premiums going forward, allowing you to keep a portion of the death benefit without having to pay anything else out of pocket. Then, upon your passing, the people you list as beneficiaries will receive the remaining death benefit, completely tax-free.
Accelerated Death Benefits
Per Paying for Senior Care, a way to access the value of your insurance policy is through an accelerated death benefit. If you were to become chronically or terminally ill, you may be able to receive a portion of your death benefit as a way to cover medical expenses and other costs of daily living. This can be a good option for someone who needs financial help while living but also wants to preserve a portion of the death benefits for survivors. Before accessing these benefits, it’s important to become familiar with any potential tax implications.
Using a Policy Rider
Life insurance policies often include options for riders, or add-ons, that allow you to access part of your death benefit for specific uses. Some people add long-term care or chronic illness riders to their life insurance policy as a way to cover long-term care costs without depleting their savings. For many people, this benefit is a great alternative to long-term care insurance, which can often be costly and isn’t always needed.
These options for accessing your benefits are just a few examples of how life insurance can be a valuable tool for protecting your financial future. Make sure you’re familiar with all the ways a life insurance policy can benefit you financially, not just for the peace of mind it provides but also for the security it can give you later in life. Connect with Aware Insurance for more information today!