Why Permanent Life Insurance Should Be Included in Your Financial Plan

Many people think of permanent life insurance as a way to protect your loved ones if you die. When you pass away, it pays out a death benefit to provide for your beneficiaries. But some may not know that a permanent life policy can also serve as an essential piece of your overall financial plan, thanks to the cash value growth component. Let’s explore a few ways that a permanent life insurance policy can contribute to your financial plan.

1. It lets you build wealth tax-deferred

The cash value component of permanent life insurance grows tax-deferred. That means when you earn interest on your savings, you won’t owe taxes, helping you build wealth faster. This is especially important for people with higher incomes. Many tax-advantaged retirement accounts have income or contribution limits, so permanent life insurance offers a new way to save and invest tax-deferred.

2. It offers lifelong financial protection for your family

An important part of your financial plan is determining how you’ll help your loved ones in the event of your passing — especially if you die earlier than expected. Permanent life insurance is designed to do just that. The right policy can ensure your loved ones receive significant financial help when you pass away.

3. It can offer an extra source of funds

Once your cash value grows large enough, you can tap into it like most other sources of funds when you need it, such as for emergencies or large purchases. Here are three common ways to do this:

• Withdraw from the policy: You don’t have to pay withdrawals back. However, your death benefit may be reduced, and you could owe taxes on any gains you withdraw.
• Borrow from the policy: You can use your cash value to get a loan with no credit check and a low-interest rate. There’s no set repayment date, so you can keep the loan as long as you need. But your policy may lapse if the outstanding loan exceeds the remaining cash value.
• Surrender the policy: If you surrender your life insurance policy, the insurer will pay you the cash value. But keep in mind that you may owe surrender charges (taken out of the cash value) if you surrender the policy early. Regardless, you can use this cash value for any purpose, such as providing assets for your family or paying off debt.

The bottom line

Permanent life insurance can offer more benefits than just protecting your loved ones. Depending on your circumstances, it could play an important role in your financial planning. A permanent life policy can help you build wealth tax-deferred and use it for various purposes, from emergencies to large purchases. It also helps you leave a legacy and protect your family financially after your death. All that said, consider speaking with a financial advisor before deciding whether life insurance fits into your financial picture.

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