Insurance 101: How Life Insurance Can Offer Benefits Before Death

While many people do buy life insurance just for the monetary benefit payable upon death, there are certainly other reasons to buy life insurance. In fact, life insurance can offer living benefits that are payable before a person’s death. Here are some ways a life insurance policy can offer benefits before death.

Building Cash Value

Did you know that you can purchase a life insurance policy that builds cash value as you pay your premium each year? If you buy the right policy, your death benefit will remain level, and you can build cash value in addition to the policy’s face amount. If you ever need to access that money for any reason, you can make a withdrawal that will not affect the policy’s face value. This means that even if you withdraw some of the cash, the death benefit will remain the same for the beneficiary. You might need to make a withdrawal to pay for a kid’s college education or your retirement.

Borrowing from the Policy

Depending on the type of life insurance policy you buy, you may be able to borrow money from the policy. This can be helpful if you get into financial trouble or need access to cash that you can’t otherwise get. You are usually charged interest on the money that you borrow, but the money that is left in the policy continues to draw interest. You typically have to repay the money you borrow in order to get the full face value of the policy at the time of death. If there is an outstanding loan against the policy at the time of death, that death benefit will be decreased by that amount.

Using the Policy as Collateral

Another benefit that life insurance offers before death is that you can use the life insurance policy as collateral to help you borrow money. This is extremely helpful in the current economy because you may not be able to get a loan for new home or a car unless you have some form of collateral.

Paying for a Terminal Illness

You may also be able to get cash out of your life insurance policy before death if you have been diagnosed with a terminal illness. This means that you will have money to pay for expensive medical treatments, medications, or any final wishes that you may have. Any money that is left in the policy upon your death would then be paid to the beneficiary.

As you can see, there are some good reasons to buy life insurance other than just for the death benefit. Speaking with a life insurance expert such as one specializing in long term care insurance in Spokane can help you understand what life insurance has to offer. Many are surprised by how much more this insurance category can do.