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Using Life Insurance as a Living Benefit

Most people think life insurance is a financial instrument that only benefits us when we die. However, these policies also carry several benefits for when we are alive too. In fact, they may be the missing piece in your financial portfolio.

Changes in regulations over recent have changed the way life insurance policies are sold and structured. Some life insurance policies have excellent benefits you can unlock while living.

Many business owners or wealthy individuals don't always see the utility of life insurance. There is a perception that these policies are the domain of people with large debts or those wishing to cover their funeral expenses.

Those are good uses of life insurance policies. However, market competition has led to a greater variety of life insurance contracts, some of which have surprising benefits and uses.

Tax-advantaged treatments

Thanks to Section 7702 of the Tax Code, life insurance policies can accrue interest that is exempt from state and federal income taxes. Because these plans are considered "non-qualified," there are no limits to the amount of money you can place into them.

In effect, business owners can purchase policies that allow them to receive instant crediting based on equities index like the S&P 500. When combined with terms that protect your investment from market downturns, your life insurance policy can allow you to generate income while reducing the amount of tax you pay.

Deferred payments

Some life insurance policies can be used to defer compensation and therefore reduce tax. This process can be advantageous if you're a business owner or a highly compensated individual.

Instead of receiving income that pushes you into a higher tax category, you can use these plans to spread out your payment for a later date. These "non-qualified" structures give more control over income distribution, especially compared to a 401(k) or IRA.

This extra power can be great when you retire, too, because they allow you time to get your payouts in line with market downsides.

Employee retention

As a modern-day business owner, you'll understand the difficulties of attracting and retaining the best staff in our competitive marketplace. However, HR and finance departments can work together to find ways to offer candidates compelling benefits.

Cash-value life insurance policies can augment executive benefit programs. When combined with a vesting contract and schedule, these packages can work to communicate a company culture that resonates with candidates. By understanding candidates' financial goals, your business is better positioned to attract and hold on to the next generation of great employees.

Unlock the power of life insurance

Modern life insurance policies have many great benefits. More competition has allowed these contracts to become far more valuable. As such, you can use them to reduce tax, defer payments, or become the centerpiece of an attractive benefits package that helps attract and retain employees.

DPH Financial Services can help you find the best life insurance policy for your needs as a business owner or individual. We offer a free life insurance quote that allows you to compare rates and find the best policy for your specific needs. Contact us today to learn more.

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