Life insurance can play a key role in that plan. And it doesn’t have to be scary or expensive. If you’re just starting out, you’ll be surprised how much coverage you can buy for a very affordable amount with term insurance. As your financial situation and your goals change over time, you can choose to convert that term policy to something more long-term, such as universal or variable universal life insurance, both of which offer you greater flexibility and the potential to build cash value that you can use in the future.
Regardless of the type of life insurance you choose, the benefit paid to your beneficiaries is generally federal income tax free. Cash value within a life policy grows tax-deferred, which is an attractive feature for those who want to accumulate value in the policy so that it can be withdrawn or borrowed against in later years.
Some people use their life insurance cash value to:
- Help fund college tuition
- Increase their supplemental retirement income.
- Purchase a vacation home