The living benefits of life insurance unlock many wealth planning possibilities for wise policyholders.

However, living benefits of life insurance are only available in permanent insurance. This is life insurance that carries a cash value. This is opposed to term life insurance, which has no cash value, and therefore no living benefits.

I co-authored the bestseller What Would the Rockefellers Do? with Garrett Gunderson. In it, we detail the living benefits of life insurance. Get your free audiobook or hardcover copy to learn more.

What is Term Life Insurance?

Term life insurance is a type of life insurance policy. It provides coverage for a specific period, or term. This period can range from 10 to 30 years.

If the insured person dies within the term, the beneficiaries receive a death benefit. However, if the insured person outlives the term, the policy expires. At this point, there is no payout or cash value.

Term life insurance is often chosen for its affordability. Premiums are generally lower than permanent life insurance. This makes it an attractive option for those on a budget.

It is also straightforward and easy to understand. You pay the premium, and the insurance company provides coverage for the agreed term. If you die during the term, your beneficiaries receive the death benefit. If you survive the term, the policy ends.

What is Permanent Life Insurance?

Permanent life insurance, also known as cash value life insurance, lasts for the insured person’s entire life. It does not expire after a set term. As long as you pay the premiums, the policy remains in force. Permanent life insurance includes a death benefit and a cash value component. This cash value grows over time and can be accessed while you are still alive.

There are different types of permanent life insurance. These include whole life, universal life, and variable life insurance.

Whole life insurance offers fixed premiums and a guaranteed cash value. Universal life insurance provides flexible premiums and adjustable death benefits. Variable life insurance allows you to invest the cash value in various investment options.

The Living Benefits of Life Insurance

The living benefits of life insurance refer to the advantages you can access while you are still alive. These benefits are only available with permanent life insurance. Here are some of the living benefits:

1. Cash Value Accumulation: As you pay premiums, part of the money goes into a cash value account. This account grows over time and earns interest. You can borrow against this cash value or withdraw it.
2. Policy Loans: You can take out loans against the cash value of your policy. These loans usually have low interest rates. You are not required to pay them back, but any unpaid loans will reduce the death benefit.
3. Withdrawals: You can withdraw money from the cash value. This can be useful for emergencies or major expenses. However, withdrawals may reduce the death benefit.
4. Dividends: Some permanent life insurance policies pay dividends. These are a share of the insurance company’s profits. You can take dividends as cash, use them to reduce premiums, or reinvest them to increase the cash value.
5. Accelerated Death Benefits: If you are diagnosed with a terminal illness, you can access part of the death benefit early. This can help cover medical expenses or other costs.
6. Living Needs Benefit: Some policies offer benefits for chronic or critical illnesses. This can provide financial support if you need long-term care or face a serious health condition.
7. Liability Protection: You cash value is protected from creditors and lawsuits.

People often ask, is whole life insurance a good investment? Technically, we refer to it as a savings alternative. However, the living benefits can make your investing safer and more efficient.

“Buy Term and Invest the Difference” Does Not Give You Living Benefits of Life Insurance

Some financial advisors recommend buying term life insurance and investing the difference in cost. This strategy is known as “buy term and invest the difference.” It suggests that the lower premiums of term life insurance allow you to invest the savings elsewhere.

While this may work for some, it does not offer the living benefits of life insurance.

Investing the difference may yield returns, but it lacks the security of permanent life insurance. The cash value of permanent life insurance grows tax-deferred. It also provides a guaranteed rate of return.

Additionally, the policy loans and withdrawals offer liquidity that is not available with most investments. The accelerated death benefits and living needs benefits provide financial support in times of need.

These are just some of the benefits of whole life insurance.

How the Living Benefits of Life Insurance Unlock Your Wealth

The living benefits of life insurance can play a crucial role in your financial planning. Here are some ways they can unlock your wealth:

1. Supplementing Retirement Income: The cash value can provide an additional source of income during retirement. You can take withdrawals or policy loans to cover expenses.
2. Emergency Fund: The cash value can serve as an emergency fund. You can access it quickly without selling investments or taking out high-interest loans.
3. Investing: You can leverage your cash value to fund investments.
4. Tax Advantages: The growth of the cash value is tax-deferred. Policy loans are also tax-free. This can provide significant tax savings over time.
5. Estate Planning: The death benefit can help cover estate taxes and other expenses. This ensures that your heirs receive the full value of your estate.
6. Financial Flexibility: The living benefits provide financial flexibility. You can use the cash value for various needs, such as education, home purchase, or business investment.

 Protect Your Wealth with the Living Benefits of Life Insurance

The living benefits of life insurance protect your wealth. Life insurance companies have proven to be safe, stable, and predictable.

The cash value is protected from taxes, creditors, and lawsuits.

Suppose you’re disabled or diagnosed with a terminal illness. You can access the death benefit to cover medical costs.

Grow Your Wealth with the Living Benefits of Life Insurance

You can leverage the living benefits of life insurance to grow your wealth.

The cash value grows on a tax-deferred basis. You can access it tax-free in the form of policy loans.

Furthermore, the interest compounds uninterrupted. This is because when you take out policy loans, you don’t take money out of your cash value. The life insurance company lends you money using your cash value as collateral. Your cash remains in your account accruing interest.

Unlock Your Wealth with the Living Benefits of Life Insurance

The living benefits of life insurance give you a permission slip to spend your cash value while you’re alive.

Suppose you accumulate money in a 401(k) or IRA. At retirement, you’ll be afraid to spend the money for fear of running out prematurely.

If you had that money in a whole life insurance policy, you’d be able to spend it. You can spend it in the form of policy loans. You have full confidence that your death benefit will still go to your heirs.

Conclusion

In conclusion, the living benefits of life insurance offer numerous advantages that go beyond the death benefit. These benefits are only available with permanent life insurance. They provide financial security, flexibility, and opportunities for wealth accumulation.

Term life insurance is affordable and straightforward. But it lacks the living benefits that can enhance your financial well-being. Therefore, considering permanent life insurance with its living benefits can be a wise choice for long-term financial planning.

Just be sure to get the best whole life insurance for you.

Want to learn more about how to leverage the living benefits of life insurance? Get your free audiobook or hardcover copy of What Would the Rockefellers Do?