If you have a loved one who is getting ready to retire, or if you are in your retirement years yourself, you might be wondering what type of financial planning tools you should use. You may want to consider purchasing life insurance with living benefits so that your family can receive income after you pass away. However, before you purchase any type of insurance policy, you need to understand the pros and cons of this type of plan. Here are some of the most important things you should know about this type of life insurance.
First, you need to understand that there are two types of living benefits. One type is known as “cash value” and the other is known as “accumulation”. The difference between these two types is that cash value life insurance provides a death benefit based on the amount of money paid in premiums, while accumulation life insurance provides a death benefit that is based on the accumulated amount of the policy’s cash value. In other words, you could have a $100,000 cash value life insurance policy with a $10,000 death benefit, or you could have an $1 million accumulation life insurance policy with a $1 million death benefit.
Next, you need to understand that a living benefits life insurance policy is not designed to provide you with a steady stream of income. Instead, it is designed to help pay for expenses such as medical bills, funeral costs, and other miscellaneous expenses. If you choose to purchase a living benefits life insurance policy, you will need to determine how much of your monthly premium payments will go towards these expenses. For example, if you were to purchase a $1 million living benefits life insurance policy, but only planned on using $250,000 of your monthly premiums to pay for expenses, you would be paying too much for the insurance. However, if you wanted to pay $500,000 per year to pay for expenses, then you would be paying too little. It all depends on how much you expect to spend on expenses.
You also need to understand that living benefits life insurance policies do not provide guaranteed coverage. For instance, if you die before the age of 65, you will not receive any death benefits. Instead, you will receive a refund of the premiums that you paid, and your beneficiaries will receive nothing. Therefore, you need to make sure that you plan out your finances carefully before purchasing a living benefits life insurance policy. This way, you can ensure that your loved ones will receive the coverage they need.
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