How To Use Life Insurance

Life insurance - what is it used for?

While life insurance is designed to pay the policyholder’s beneficiary a death benefit, the policy can be used for other needs.  It can even be used by the policyholder while they are still alive.

The death benefit of a life insurance policy is the use most of us are familiar with when it comes to life insurance. When the policyholder passes away, the life insurance is paid out to the beneficiaries. This is a good way to ensure your loved ones have time to grieve without worrying about how they will handle the new financial pressures that come with your passing. Make sure you have enough so that your loved ones have peace of mind.

If you purchase a whole life insurance policy, you can use it to increase your savings by borrowing money from your policy. The funds will be tax-free and there are no restrictions on how the money can be used. But keep in mind, if the loan isn't repaid by the time the policyholder dies, the death benefit may be lower. 

Many life insurance policies have a cash-in value, meaning, you can cash in your policy for its cash value. But remember if you do this, the life insurance policy is canceled, so there will be no payout of benefits when you pass. 

A life settlement is when you sell your policy under the terms of a life settlement. Using a broker, you can find a buyer who pays a lump sum for your policy. The benefits and policy go to the new buyer, and new beneficiaries will be appointed. Typically, life settlements pay more than the cash value option.

There are many options when it comes to life insurance, from what type of policy you buy, to how you use the policy and its benefits. Be sure to speak with a trusted insurance agent or company when purchasing a policy. 

For more information on life insurance, or to find a lost life insurance policy, visit our website at doi.sc.gov/life.