Life insurance often gets overlooked as an estate planning tool. It’s a powerful way to help your heirs and make the process much easier.
The only problem is that you can’t just buy any life insurance — you need to get the right kind, or it could hurt your goals.
What is considered an asset under the tax laws? What kind of life insurance won’t get your heirs stuck with an IRS bill?
Here’s a quick guide to the different types of life insurance so you can make the right estate-planning decisions for your family.
How Life Insurance Can Be Used as an Asset
At least 3 out of 4 American adults have some life insurance.
An asset is something that provides long-term economic value. Many people believe that life insurance is an asset because it can be used to help loved ones financially if the policyholder dies.
While life insurance can be an essential safety net, it is not typically considered an asset because it does not provide long-term economic value. For more details, you may consult with Paradigm Life.
Here Are Some Life Insurance Is Considered an Asset
Whole Life Insurance
There are different types of life insurance, and whole life insurance is just one type. Whole life insurance is considered an asset because it has a cash value that can be used during your death.
The cash value of whole life insurance can be used to pay for funeral expenses, pay off debts, or it can be used to provide financial security for your family.
Universal Life Insurance
Universal life insurance is one type of life insurance that can be considered an asset. Universal life insurance policies have a cash value component that grows over time. This cash value can be borrowed against or withdrawn, providing policyholders with a source of emergency funding.
Moreover, universal life insurance policies offer death benefits, covering final expenses or replacing lost income. While universal life insurance is not the right asset for everyone, it can be valuable to an overall financial plan.
Indexed Universal Life Insurance
Indexed universal life insurance can be an excellent asset for individuals looking for a way to grow their wealth while also providing themselves with a death benefit.
In addition, indexed universal life insurance can give the policyholder the potential to earn a higher rate of return than traditional fixed-rate life insurance products.
Lastly, the death benefit of an indexed universal life insurance policy can provide financial security for the policyholder’s loved ones in the event of the policyholder’s death.
These Tips Will Help You Secure Your Family
An insurance policy is considered an asset if it has a cash value. Universal life, whole life, and indexed universal life insurance policies have a cash value.
The cash value of an insurance policy can be used as collateral for the loan or borrowed against in times of financial need.
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