4 Underrated Life Insurance Benefits Every Senior Should Know

You might have heard that life insurance is all about giving your family a financial cushion when you pass away. But hold up, there's another side to it for seniors.

Think of life insurance as the Swiss Army knife in your financial toolkit. Its features do much more than pay out when you're gone. These extra perks often fly under the radar, offering a safety net and some solid benefits you can use right now.

1. Living benefits are a financial safety net for the unexpected

One of the most compelling yet underrated features of life insurance is "living benefits." This provision allows policyholders to access a portion of their death benefit under certain conditions, such as terminal illness or the need for chronic care.

A study by the American Association for Long-Term Care Insurance (AALTCI) indicates that 52% of individuals over the age of 65 will require some form of long-term care services in their lifetime. With the average annual cost of private nursing home care soaring to over $108,405 (as reported by Genworth's 2020 Cost of Care Survey), the ability to tap into living benefits can be a financial lifesaver for many seniors.

2. Provides a source of retirement income

Perhaps surprisingly, life insurance can also serve as a supplemental source of retirement income. Policies with a cash value component, such as whole life or universal life insurance, can grow over time, offering policyholders the option to borrow against this cash value or withdraw from it directly.

Approximately 90 million American families depend on life insurance for financial and retirement security. This approach provides a cushion that can help seniors navigate the financial uncertainties of retirement, from healthcare costs to unforeseen expenses.

3. Creates estate planning and wealth transfer efficiency

In estate planning, life insurance shines as a tool for efficient wealth transfer. The death benefit from a life insurance policy is typically paid out tax free, offering a clear advantage over other inheritance methods. Plus, because these proceeds bypass probate, beneficiaries can access funds much more quickly.

4. Allows you to give to charity

For seniors keen on philanthropy, life insurance presents an avenue for impactful charitable giving. By designating a charity as a beneficiary, they can achieve their philanthropic goals posthumously, often contributing more significantly than would be feasible through direct donations. This method not only secures a legacy of generosity but can also offer tax benefits, enhancing the donor's financial strategy.

Proceeds from life insurance policies often represent some of the most substantial donations a nonprofit will get, typically ranging from 20- to 100-times larger than their annual gifts. That's a testament to the power of these policies in facilitating charitable contributions.

With its diverse array of benefits, life insurance stands as a cornerstone of financial security and flexibility for seniors. From mitigating the financial burden of healthcare through living benefits to enhancing retirement income, facilitating efficient wealth transfer, and enabling substantial charitable donations, the utility of life insurance extends well beyond the death benefit. By embracing these underrated benefits, seniors can maximize their financial well-being, ensuring their peace of mind and that of their loved ones and chosen causes.