The bottom line: When you die, life insurance provides money to the people who depend on you. It can also do much more. So, how do you know which type of policy to choose for a particular need you may have?

There are two main types of life insurance policies:

Now, let’s look at the powerful ways life insurance can help you, starting with the most obvious:


One: Provide Money to Help the People You Love

You work hard to provide for the people you love, seeing to it they have what they need. But what will happen to them when you die? Think about how they’ll be able to pay for such things as your final expenses, debt, the mortgage, care of a child, or a college education for your kids or grandkids.

Life insurance provides them with a sum of money, known as a death benefit. In general, a term policy can help you to meet these needs. If you want a longer-lasting policy, take a look at a permanent policy.


Two: Leave a Legacy

You want to leave a meaningful amount of money to the people you love and the causes you care about. You also want to minimize the impact that taxes can have.

Life insurance can provide them with a lump sum of money. A portion of the death benefit from a life insurance policy can be used to pay any taxes that may be due on your estate. Typically, your beneficiaries won’t have to pay any taxes on the money they receive from your life insurance policy, per IRC §101(a). A permanent policy for one or a permanent policy for two is generally the type of policy to choose.


Three: Create Another Source of Income, Especially for Retirement

As you go through life, you’ll probably have some large expenses, such as paying for your kids’ or grandkids’ college educations, the mortgage, or a major emergency. You may also want to supplement your retirement income—another large expense.

Over time, many permanent life insurance policies offer you the potential to accumulate cash value. It can be used any way you wish,1 including as extra retirement income, through tax-advantaged loans from your policy’s cash value. Indexed and variable permanent policies are often used as part of an income strategy.


Four: Have Access to Money In Case You Get Sick

People are living longer than ever before. It’s important to think about how you could get the extra money you might need to take care of yourself if you get a chronic or terminal illness. Permanent life insurance can help.

In addition to tax-advantaged access to cash value,1 many policies offer an optional, added provision, called a rider,2 that lets you accelerate the death benefit while you are still living. The money can be used for any reason.

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