A life insurance payout can be used for more than funeral expenses. Learn other common uses for life insurance.
You may know that buying life insurance may be part of being responsible and helping to protect your family from financial instability, but do you know how your life insurance policy could be used? Many of us imagine that it will be used for mortgage payments, medical bills and funeral costs, but life insurance is far more versatile.
Since a life insurance payout is usually distributed in one lump sum, no one will dictate how that money should be used, giving you and your beneficiaries the ability to design a policy that truly fits your needs. How can life insurance be used exactly? Here are a few unexpected ways that your life insurance policy can help keep your family's future on track even after you're gone.
Pay for childcare expenses.
If your partner stays home now to watch the kids, they might have to worry about more than paying off a mortgage. The death benefit they receive from your life insurance policy could help them pay for day care or an in-home nanny for your children while they go back to work.
Fund your kids' college tuition.
Wouldn't it be comforting to know that if something happened to you, your children would still be able to go to college without the burden of loans and debt? There is little that is more important to a parent than the lives of their children and their kids' future well-being and success. The death benefit from your life insurance policy could help ensure that your children's college tuition is paid for. That means you can also have the peace of mind that comes with a financial product designed in part to help them achieve their dreams.
Create a supplemental retirement fund.
If you're the primary contributor to your retirement accounts and you were to pass away unexpectedly, your partner could come up short later in life. With enough life insurance coverage, a payout from your policy could help your spouse continue to make contributions to their retirement, helping to ensure financial security in their golden years.
Pay off credit card debt and other small debts.
Even though our minds usually go to the big ticket items like mortgages and student loans, when we consider our obligations, our small debts may add up too. Many of us have credit card debt, financing on household furniture and, perhaps, car payments. When we consider quality of life for our loved ones, keeping the house is crucial, but we probably wouldn't want our family to have to worry about paying off the new car or paying down the Visa either. With the proper amount of coverage, your loved ones could use your death benefit to pay off these small debts, allowing them to help maintain the quality life you helped to construct.
At some point in our lives, many of us will likely consider buying life insurance. We'll want to cover the mortgage for our spouse and any medical bills that might accrue, but with the proper amount of coverage, life insurance can be used for more than the bare necessities. The death benefit from your policy could help ensure that your family's financial quality of life is not disrupted and that money won't hold them back from achieving success and happiness.