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The importance of Life Insurance

1. It can cover major expenses during your lifetime

The specific life insurance policy you carry may help cover potentially unexpected costs, including:

Medical — Some life insurance policies provide a living benefits rider (usually for an additional cost), which gives you the option to advance a portion of the death benefit if you’re diagnosed with a terminal illness. You could use it to pay for medical treatment or assistance with everyday activities to care for your basic needs.

Long-term care — Hybrid policies combine life insurance with long-term care benefits that may help you pay for the costs of in-home care, assisted living, a nursing home or other related expenses that Medicare may not cover. Long-term or chronic care riders, available at an additional cost, may also be added to life insurance policies, allowing you to access a portion of your policy’s benefit early for care expenses.

2. It can protect or supplement your retirement assets

Depending on your unique situation, life insurance can potentially help you gain:

Pension flexibility — If you’re married and have a traditional defined-benefit pension plan, you could choose to receive a higher monthly single life benefit payout instead of a joint and survivor option. The difference in monthly income could then be redirected to a life insurance policy (pending insurability) to help provide the surviving spouse with income.

If the spouse dies before the pensioner, the surviving spouse could choose to increase their income by reducing the life insurance amount. There is also the potential to leave life insurance benefits to heirs. Traditional defined-benefit pensions do not provide that option.

Supplemental retirement income — When properly designed for you, a cash value life insurance policy (such as whole life, universal life or variable universal life) can generate cash value as a stable source of supplemental retirement income, if needed.

Tax efficiency — With effective planning, life insurance proceeds can be structured to help pay estate taxes or settle outstanding loans. Some insurance solutions can also provide you with tax advantages, such as the ability for your life insurance policy to grow tax-deferred. You can discuss the potential advantages with your advisor and a tax professional.


3. It can generate and transfer wealth

You can use life insurance to help enable:

Potential portfolio returns: Universal, indexed universal life and variable universal life policies can help support your long-term investment strategy. They combine life insurance coverage with the ability to earn potential investment returns. Some indexed universal life policies also offer downside protection — a way to help reduce the frequency or amount of losses among your investments.

Wealth transfer: Life insurance can protect and sometimes even increase the amount you’re able to pass to a beneficiary. For example, if you don’t need the income from annual required minimum distributions (RMDs) when you reach age 72, you could consider using the RMDs to fund a life insurance policy, assuming