Learn why life insurance should be considered in your financial planning strategy. Discover how cash value life insurance can help. Contact us for info.
Most Americans manage their own finances, according to the 2019 CNBC and Acorns Invest in You Savings Survey1 that found 75% of Americans don't use professional financial planning. If you're like most Americans, or even if you do use a financial planner, you should make sure life insurance is part of your financial portfolio.
You may be aware that life insurance protects your family financially in case the insured passes away. Some types of life insurance also build up cash value, which you can borrow against when you need to.
Regardless of what type of life insurance policy you're considering, here are the benefits of life insurance and how it can boost your financial portfolio.
What Is the Financial Benefit of Life Insurance?
Permanent life insurance both provides a death benefit and builds up cash value as the policyholder makes premium payments. That cash value can be used toward retirement or unexpected expenses that come up, such as a medical emergency.
While the insured is alive, the policyholder can borrow against the cash they've accumulated. With permanent life insurance options like universal life insurance, whole life insurance and guaranteed issue life insurance, cash value benefits are in play while the insured is still alive.
More Cash Value Benefits
Besides borrowing against a life insurance policy's cash value, policyholders have other options with permanent life insurance. If the holder decides to surrender the policy and discontinue life insurance coverage, they are able to withdraw the total cash value of the policy. That can be a nice safety net to have in place just in case you need funds.
Another benefit of cash value insurance is that once the policy value has reached a certain point, you may be able to use the cash value toward paying your premiums. This can help if you have less expendable income later in life but want to continue your life insurance policy.
Policyholders can also take out a cash value loan, which typically has a lower interest rate than a traditional bank loan. For future needs, like a car loan or a medical bill, instead of overpaying with a bank, you can get a loan for a lower interest rate with a cash value life insurance policy.
https://www.forbes.com/sites/financialfinesse/2020/12/30/20-financial-resolutions-for-2020
How Life Insurance Affects Your Portfolio
One of the major benefits of diversifying your financial portfolio with life insurance is that the cash value you build up is available for loans and withdrawals tax-free. Some investment types, like a 401(k) or IRA, will tax you if you withdraw funds earlier before retirement age. With the cash value you've built up with a permanent life insurance plan, you won't be penalized tax-wise for withdrawing it. Without permanent life insurance, you may be taxed for early withdrawals from your other plans.
Another benefit of having permanent life insurance is that the cash value increases your overall financial assets. You may choose to alter the risk strategy of your other investments since you know you have a certain amount of funds in cash value through life insurance.
Life insurance with cash value can also be a good option for your financial portfolio if you're looking to diversify it because you're maxing out your other retirement accounts. Accounts like a Roth IRA limit the amount you can contribute each year, so a cash value life insurance plan increases what you're able to contribute for the future.
How Life Insurance Affects Your Portfolio
One of the major benefits of diversifying your financial portfolio with life insurance is that the cash value you build up is available for loans and withdrawals tax-free. Some investment types, like a 401(k) or IRA, will tax you if you withdraw funds earlier before retirement age. With the cash value you've built up with a permanent life insurance plan, you won't be penalized tax-wise for withdrawing it.
Another benefit of having permanent life insurance is that the cash value increases your overall financial assets. You may choose to alter the risk strategy of your other investments since you know you have a certain amount of funds in cash value through life insurance.
Life insurance with cash value can also be a good option for your financial portfolio if you're looking to diversify it because you're maxing out your other retirement accounts. Accounts like a Roth IRA limit the amount you can contribute each year, so a cash value life insurance plan increases what you're able to contribute for the future.
What About Term Life Insurance?
Even life insurance that doesn't build cash value (ex. term life insurance) should still be a part of your financial portfolio. Having life insurance in general is smart for financial planning because it gives your partner, spouse and/or family peace of mind that their financial future will be secure. Your partner or spouse can create a financial plan with the mindset that wherever life takes them and your family, they won't need to make drastic changes to their plan in order to survive.
Term life insurance is generally a relatively low-cost option to provide financial protection in the future. Compared to passing on and leaving loved ones stranded with outstanding debt or a lack of income, the security of having a life insurance policy makes financial sense.
Talk with the Insurance Experts at AIG Direct
Despite the low percentage of people who work with financial advisors, it's always recommended to consult with a financial professional for the best recommendations for you and your family. If permanent life insurance or another type like term life insurance makes sense for your family's financial plan, contact 800-294-4544 for a free life insurance quote.
1. https://www.cnbc.com/2019/04/01/when-it-comes-to-their-financial-future-most-americans-are-winging-it.html
2. https://www.forbes.com/sites/financialfinesse/2020/12/30/20-financial-resolutions-for-2020/#5c6a27e65882
