Life insurance comes in many forms and is used for many purposes beyond the primary purpose of death protection. Today we will talk about two less well know uses. Most people are aware you can take a loan from your policy, but to what extent? Walt Disney used his whole life insurance cash value to start Disney World. Over the last 20 years life insurance policies and state regulations have evolved to allow life insurance to do more.
Changes in healthcare have created a greater financial weight the ever before and many insurance companies and policies have adapted to help carry that weight. With that stated let's look at two lesser know uses of life insurance, capital appreciation and medical assistance.
Capital Appreciation
One of the more recent uses for life insurance is providing a supplement to retirement income. While traditional whole life does carry a cash value, the interest rates in many of those policies are unable to keep up with inflation and either lapse due to lack sufficient internal growth or because the policy owner in unable to pay for the policy after retirement, many whole life policies requirement payment to age 100. To correct this issue many policies started use Indexes such as the S&P 500, The
Bank of America Index or Barclays to name a few. These policies are know as Index Universal Life(IUL) policies and interest rates generated by these types of polices have a better chance of keeping up with or, in some years outpacing inflation. Many accumulate enough cash value to keep the policy in force with no premium required after a 15 to 20 year premium payment schedule, while others can provide a stream of income to help supplement retirement. There is a cost of insurance, which is part of every insurance policies, however with overfunding your policy at an early age you can keep the cost of insurance low and add more to your retirement plan.
Medical Expense Assistance
Another feature of life insurance is the ability to aid with various medical conditions outside of what health and disability insurance will pay for. These features are referred to as the “living benefits”, they are chronic illness, critical illness, and terminal illness. While different plans pay different amounts based on the amount of death benefit your policy has, they generally pay under the same conditions.
The chronic illness rider pays if you are diagnosed as being chronically ill and are unable to perform without substantial assistance at least 2 of the 6 Activities of Daily Living”. Critical illness, also a rider, pays if you are diagnosed with a critical illness such as a heart attack, cancer, or a stroke. Most plans cover at least 10 critical illnesses.
Finally, the terminal illness rider may pay up to ½ of the death benefit early if your life expectancy is 12 months or less. All these riders are designed to provide financial assistance for many of the medical situations we face every day.
The world has seen many changes in the last three years, such as the countless lives lost to covid, the losses suffered by many due to the volatility of the markets and the unfathomable rise in healthcare cost. With all the calamities that can happen in life, it is more important than ever, to have life insurance to help you cope and adapt to these changes.
Comments