What You Can Do With Life Insurance Benefits
Nov 09, 2023 | 7 MIN READOne of the best things you can do for yourself and your family is plan for the future. Even though discussions of end-of-life care or what happens after you’re gone may be difficult to have, they are important for proper planning regarding the wellbeing of you and your family.
Starting this discussion with a conversation about life insurance is an excellent way to help prepare for what may come next. Whether that’s medical coverage or an inheritance for a loved one, life insurance can provide the safety net that you’ve been looking for. While financial security and peace of mind are notable perks, life insurance benefits can do more than just provide comfort during the final stages of life.
The Benefits of Life Insurance
Whether you have a preexisting condition or are planning ahead for your family, life insurance is essential for proper care and protection when the unexpected occurs. There are several reasons why life insurance is valuable for anyone. First, life insurance plans can offer financial coverage for large medical bills as an individual’s health declines.
Secondly, life insurance can offer substantial financial security for dependents or beneficiaries when the policyholder has passed away. End-of-life expenses often come with unexpected costs, which family members might not be prepared to pay, especially when coping with loss. Depending on the type of insurance policy, the money that goes to beneficiaries can help them with their long-term financial plans.
Additionally, life insurance policies provide peace of mind for your family. Losing a loved one is never easy, but knowing there will be a financial safety net in the event of a policyholder’s death can greatly reduce some of the stress your family may feel as they grieve. In particular, the loss of the primary wage earner can be a significant area of concern. For this reason, 68% of Americans choose to purchase life insurance products in preparation for a reduction in income.
Life insurance policies can go a long way, not only for the policyholder but for their families as well. But what do these benefits actually look like once a policy is put into place? Let’s take a closer look.
How to Use Life Insurance Benefits
There are several ways that life insurance benefits can be used. Beyond providing ease of mind, these payments can go a long way for your beneficiaries. Additionally, there are ways in which you can use life insurance benefits before the policy is terminated. Let’s look at a few ways in which you can reap the benefits of your life insurance policy.
Final Expenses
After a loved one passes away, the family is frequently faced with unexpected financial burdens. Without proper preparation, the extent of these fees can be quite overwhelming. Fortunately, life insurance with death benefits can provide some assistance with these fees.
Death benefits are payments made to a beneficiary after the policyholder has passed away. The amount of the death benefit, as well as who should be receiving the benefit, is determined by the policyholder. While death benefits can be used toward all kinds of payments, they are frequently intended for end-of-life expenses, such as medical care or funeral costs. This time may be difficult for anyone grieving, but death benefits can help ease some of the stress you might be experiencing.
Inheritance
Looking to give back to your family? Another use of death benefits is as an inheritance. In your life insurance policy contact, you can identify who you would like to receive the death benefits after you pass away. This way, you can continue to make meaningful contributions to your family in the form of a down payment on a house, college tuition, or car payments, as a few examples.
Pay Premiums
Some life insurance policies provide cash dividends to the policyholder. These dividends are payments made to the policyholder as a result of the performance of the insurance company. When the business does well, policyholders can expect their dividends to reflect that performance. Please keep in mind, however, that dividends are not guaranteed from participating life insurance policies.
Ultimately, it’s up to the policyholder to decide what to do with the money they receive from their life insurance policy. However, it’s common for individuals to choose to put their dividends toward their premium payments. This way, premium costs remain low and help remove one item from regular monthly expenses.
Cover Long-Term Costs
Medical costs and long-term care can easily cost thousands of dollars. For anyone, this is a hefty burden to bear out of pocket. Luckily, life insurance with additional riders can help provide coverage for these expenses so you don’t have to take a large sum of money from your own savings or investments.
Make a Significant Donation
If you are a philanthropic person, you can identify an organization as a beneficiary on your life insurance policy. You’ll be able to make a lasting impact by using your death benefit as a charitable donation to the organization you choose. That way, your legacy will live on as you help a charity, one that is meaningful to you, work toward their mission.
Which Insurance Policy is Right for You?
If any of these benefits have piqued your interest, it’s important to know they are not universally available across all life insurance policies. Knowing what you want out of a life insurance policy can help narrow down your options. To have a good grasp on available policies and their associated benefits, we encourage you to discuss policy options with an ELCO independent insurance agent. For now, here are a few types of life insurance policies and their benefits.
Whole Life Insurance
Whole life insurance policies, frequently referred to as permanent life insurance, provide coverage for the remainder of the policyholder’s life. Plus, whole life insurance may have cash dividends with a participating policy, though they are not always guaranteed. With this type of life insurance policy, death benefits are guaranteed, though the amounts may vary among providers.
If you are seeking out dividends and wish to use them to lower the cost of premiums or contribute to other financial burdens, then a whole life insurance policy might work well for you. However, these dividends are not guaranteed and there is some risk associated with relying on these dividends for large financial needs.
Term Life Insurance
In contrast, term life insurance policies provide coverage for a set period of time. Death benefits are guaranteed, but there is no cash value. With fewer immediate benefits, the premiums for term life insurance policies tend to be lower than those associated with whole life insurance.
If you are interested in final expense coverage but do not wish to commit to whole life insurance, then a term insurance policy might be a better match for you.
Guaranteed Issue Life Insurance
Similar to the previous two types of life insurance policies, guaranteed issue life insurance provides death benefits, but there is no need for a medical exam in order to receive coverage. In regards to death benefits, this type of policy will only provide a partial payout to beneficiaries if the policyholder passes away within the first two years of the contract. This is known as a graded death benefit.
This type of life insurance is excellent for anyone who has struggled to gain approval for a life insurance policy elsewhere and is interested in final expense benefits through death benefits. Policyholders of guaranteed issue life insurance products often are in poor health and face higher premium payments as a result.
The Bottom Line of Life Insurance Benefits
What you choose to do with your life insurance policy is up to you and the limitations established in the policy type. Whether you are looking for help with medical expenses or would like to provide an inheritance for family members, life insurance policies can help you attain those goals.
Life insurance benefits can be utilized while you are a policyholder or after the policy has been terminated. If you know what you are looking for from a life insurance policy, ELCO Mutual can help match you with the right product for your needs. To get started, speak with an independent insurance agent from ELCO Mutual today!