The importance of life insurance has been oft-discussed and written about. It’s one of the best legacies that you can possibly leave your family when the time comes as it not only ensures that all their needs will be provided for in your absence, but that it will also take care of any financial obligations that you might leave behind. 

For these reasons, life insurance lets you go through life with peace of mind. However, there’s actually more to it than meets the eye. In fact, it comes with even more financial benefits than most people realize, making life — and not just after death — so much sweeter.

Your Investment

Surprising research cited on Bloomberg shows that only a little over 50 percent of adults have life insurance. Moreover, it’s estimated that the number of life insurance buyers actually decreased in the last two years. With reasons ranging from premiums being too expensive to thinking that they don’t need it, this is a real shame, indeed.

Most alarmingly, many don’t get life insurance because they think the application process is too confusing. Again, this is unfortunate, as the process is quite straightforward. After the requisite paperwork, you might be required to undergo a blood test, which will be used to assess data like your blood pressure, cholesterol, and glucose levels, as well as your BMI. Tobacco, nicotine, or drug use will also be determined in this assessment. This is a necessary evil, as it’s the most foolproof way for the insurer to determine your overall health. This might actually work out well for you, as you could qualify for lower premiums when in the pink of health.

If you’re a small business owner, life insurance takes on another level of importance. A good strategy to have in place is to have insurance on one or more key employees, someone like a key manager or executive that plays a crucial role in operations. If this person were to pass away without insurance, your business may be at risk of serious operational disruption, layoffs, even bankruptcy or closure. Seek out plans that are available for key person life insurance, and discuss the policies with that person. 

For these reasons it’s important, therefore, to see insurance as an investment, as opposed to an added expense, because that’s exactly what it is. And like all investments, you can make it work for you.

Your ROI

Contrary to popular belief, it’s not only in death that people can benefit from life insurance. In the last few years, it has evolved so greatly that it’s no longer limited to death benefits. Rather, BlueShore Financial points out that it has become a great financial tool to have in your wealth management arsenal, which you can tap whenever you need it in a variety of ways.

Tax shelter

It’s interesting to note that with a life insurance policy, you don’t have to pay any interest, capital gains, or dividends until you withdraw the proceeds of the cash-value component. This is very similar to how retirement accounts like IRAs and 401(k)s work, in that your dollars grow essentially sheltered from tax. So, with these tax advantages in mind, life insurance would definitely make a great addition to your financial portfolio.

Guaranteed retirement income

In most cases, life insurance can be a viable supplemental income during retirement. You can do this by leveraging the cash value of your permanent life insurance policy, which you can receive tax-free and use as you see fit. After death, the proceeds of your life insurance will then cover what you borrowed — with the remaining value going to your beneficiaries.

You can also enjoy a guaranteed income in retirement with term life insurance. Because of its relatively low, fixed-price premiums, much of your disposable income is subsequently freed up, so you will be able to stay on track with your retirement savings.

Use as collateral

Depending on the life insurance policy that you have, you may also be able to borrow against it, essentially using it as collateral. This is actually a great alternative to borrowing from traditional lenders in many ways, particularly because there’s more flexibility in repayment and a lot less hassle. It’s definitely not unheard of for savvy investors to use this as an asset-building strategy.

Accelerated benefits

Some life insurance policies also include clauses for accelerated benefits, which can be particularly useful for those who need to cover medical bills and long-term care. What’s more, in many cases, these are even tax-exempt.

At the end of the day, you really can’t put a premium on peace of mind. Some say that life insurance is a gamble. Well, in that case, it’s certainly a gamble that pays off in spades.

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