Life insurance in its most basic form covers your loved ones’ expenses after your death—but there are a number of other ways to use this financial product, and they aren’t only for the very wealthy or the financially sophisticated.
Other uses for life insurance
For example, a life-insurance policy can help cover a financial shortfall in a couple’s retirement income. Let’s say you have a pension plan, and it makes up a significant portion of your retirement income. However, like many pension plans, it ends upon your death. Social Security benefits may be insufficient, and the result could leave your spouse with little to live on.
One solution: Buy life insurance to provide for your spouse upon your death. This could be a lump sum that can be converted to an income stream via some basic investments in bonds.
Financing a life insurance policy
The cost of life insurance depends on your age and health. Your agent should be able to give you options. But if you still think life insurance is too expensive after reviewing those options, there are creative ways of financing it. You might, for example, take out a reverse mortgage, then use a portion of the monthly payment to purchase a life insurance policy. This has the added benefit of giving you a roof over your heads while providing for your heirs upon your death.
Peace of mind
The bottom line: Life insurance can be a way to maximize your pension or income from Social Security, plus the peace of mind you’ll have from ensuring that your spouse will receive an insurance payment on your death.
So, when reviewing your retirement plan, it’s a good idea to look at the details of your pension or Social Security benefits and consider how life insurance could be complementary to your plan. Your life-insurance agent can assist you with this.