Life insurance can cover a wide variety of needs. For instance, while the death benefit from a policy can help with paying off debts (such as a mortgage, car loan, or credit card balances) and replacing the insured’s income, there are many other items that life insurance may cover – both after the insured dies and while he or she is still alive.
A life insurance beneficiary may use the funds for paying the insured’s final expenses – which can run in excess of $10,000 today. Death benefit proceeds can also go towards paying off other debts, creating a stream of income for a surviving spouse, family, loved ones, and just about any other need that a survivor may have. Plus, because death benefits from life insurance are income-tax-free, survivors can make use of the entire amount of the proceeds.
Life insurance may also provide “living benefits,” too. In this case, a portion of the death benefit may be accessed if the insured is diagnosed with a terminal illness and/or if they need to reside in a nursing home. (These benefits may differ from one policy to another).
In addition, the cash value from a permanent policy may be borrowed, and in turn, received tax-free. These funds could then be used for supplementing retirement income, but without having to hand over a large percentage of the funds to Uncle Sam.