Whole life insurance is a fantastic way to create security for your family and build wealth, thanks to the tax-deferred status of your contributions to your policy. Additional options you can tack onto your policy makes a life insurance policy an even more attractive savings tool as these additional products can change the terms of a policy.
Many folks use whole life insurance policies as an investment and savings tool because of the cash value that the policies accumulate. However, by adding some policy options to your whole life policy, you can make even greater use of the investment and savings opportunities that whole life insurance provides.
For example, by attaching a policy rider to your life insurance policy, you can increase or decrease benefits, eliminate policy exclusions or amend the policy in other ways. Some common policy riders include:
- Child or spousal riders — these riders add coverage for your spouse or children to your policy. Because you’re buying in bulk, this usually gets you a premium discount.
- Guaranteed insurability rider — this allows you to up your coverage without having to submit to a medical examination.
- Waiver of premium rider — if you become permanently disabled, you won’t have to pay premiums anymore to keep the policy in force.
- Accidental death benefit — this policy rider doubles the amount your beneficiaries are paid if you die as the result of an accident, as defined by your policy.
- Disability income rider — In case you become permanently disabled, this policy rider will allow you to draw one percent of your death benefit per month.
- Accelerated death benefit rider –This allows an advance payment of the face value of the policy under certain circumstances, such as the insured being diagnosed with a terminal illness.
- Living benefits rider — This rider allows insureds who have been diagnosed with a terminal illness to draw upon their life insurance benefits to pay for their medical care.
In addition to policy riders, there are alternative types of life insurance available that can help you and your family improve financial security.
One example of these alternative types of life insurance is credit life insurance. American consumers owe about $1.97 trillion in credit card debt, according to the Federal Reserve. Nearly half of all American households spend more than they make per year, and the average household carries credit card debt of at least $1,900. Now combine that with outstanding car loans and mortgages, and you’ll see that the death of a husband or wife can leave the surviving spouse in precarious financial standing with regard to household debt. Just settling household debts can take a sizable chunk out of the standard whole life policy you had set up to cover the financial burden created by the loss of your income.
Credit life insurance can be purchased at the time you take out a loan, such as a car or student loan. Some credit card companies also sell credit life insurance. If you die, this insurance will pay the remainder of the loan. In some cases, this insurance will also kick in if you become disabled.
You can build up a nice nest egg for your children by purchasing juvenile life insurance. It may seem a bit ghoulish to purchase life insurance for your child, but it can actually be a good investment for their future. By purchasing a life insurance policy while they’re an infant, you can lock in a cheap premium, and when your child becomes an adult with a family of his or her own, your child can take over the policy, giving him or her a low cost way to provide for the security of his or her family.
Also, because these policies build cash value, having one in place when your child is an infant gives it time to mature and be ready to be tapped for annuity funds or for a policy loan when your child faces big costs such as college or buying a first automobile or home.
Mortgage life insurance can be used to pay off the balance on your home loan if you die unexpectedly. The value, but not, unfortunately, the premiums, for this insurance decrease over time as the balance on your home loan gets smaller as you pay it off. This insurance may be best for young couples who may have bit off a little more than they can chew in the purchase of their first home.
It’s worthwhile to note that some of these products have been criticized as unhelpful or unnecessary by consumer organizations, so make sure you understand as much as possible about the product you’re buying before making a purchase.
Overall, however, the right policy rider for your life insurance policy or alternative form of insurance can be a valuable part of your efforts to protect the financial security of your family against the negative impact of an untimely death.