Life insurance is, without question, one of the most unique financial tools ever developed. It can help protect and sustain your family and/or business following your death. But life insurance does so much more than simply provide financial security. You can also tap into the benefits of permanent life insurance while you are still alive.
Financial Resources
Most importantly, life insurance provides your heirs and/or business immediate cash at death. This is often when it is needed the most. Income tax-free dollars can be used to pay final expenses, estate taxes, legal and administrative fees or cover unpaid medical costs. The financial resources provided by life insurance can eliminate the need to sell your home or assets. It can also prevent going into debt to cover these costs. In many cases, assets sold to meet financial obligations receive less than their market value.
A Tax-Advantaged Alternative
In addition, life insurance can also provide you with a systematic way to accumulate assets. Permanent insurance — whole life and universal life — generate tax-deferred growth potential. These can be excellent alternatives to other commonly used strategies. The biggest benefit of using life insurance to accumulate assets is that its self-completing. If, because of your premature death, you aren’t around to achieve your accumulation objectives, your life insurance 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 achieve various financial goals. These goals can be personal or business-related. 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 assets. Of course, any policy loans or withdrawals will reduce policy values and the ultimate 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. Rather, they purchase it to provide “living benefits” to their heirs or to help maintain 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
Flexibility
Competitive and market forces have brought about numerous and innovative 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 can be an important element in your risk management program. It provides a foundation of financial security for you, your family, your associates, and your business.
All guarantees are based upon the claim-paying ability of the issuer. Life insurance policies are subject to eligibility requirements and restrictions and may not be right for everyone.
Accessing cash values may result in surrender fees and charges. Also, it 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 by Penn Mutual.
Jason G Swartley is a Financial Adviser with Centra Financial Group Inc. He specializes in helping people to understand How money works, How to grow it, How to protect it, How to enjoy it and How to preserve it for generations to come.
For more information contact Jason G Swartley at 315-263-0761 or email him at jswartley@htk.com
Registered Representative of, and Securities and Investment Advisory services are offered through Hornor, Townsend & Kent, LLC., (HTK), is a wholly owned subsidiary of Penn Mutual Life Insurance company Registered Investment Advisor, Member FINRA/SIPC, 500 Linden Oaks, Suite 301, Rochester ,NY 14625. Centra Financial Group is unaffiliated with HTK. HTK does not provide legal and tax advice. Always consult a qualified tax advisor regarding your personal tax situation and a qualified legal professional for your personal estate planning situation.
© 2018 The Penn Mutual Life Insurance Company, Philadelphia, PA 19172 www.pennmutual.com
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