Wealth Insights

Top 5 benefits of life insurance

A life insurance policy may meet more of your financial needs than you think.

Key takeaways

• Life insurance is meant to support multiple stages of your financial life, not just provide money to beneficiaries after death.
• Certain policies give you the opportunity to build cash value that may be accessed for retirement income, major expenses, or long-term care.
• Historically, life insurance has been used strategically in estate planning and business succession.

Life insurance is often viewed as a way to replace income for loved ones after you die. While that role is important, it is far from the only way a policy can support your financial goals. Depending on the type of policy you own, life insurance can be both protection and a long-term financial resource.

One of the most common misconceptions is that life insurance is simply an expense tied only to a future death benefit. In reality, some policies are used as assets within a broader financial plan, offering flexibility during your lifetime as your needs evolve.

Below are five ways life insurance may provide value beyond basic income replacement.

1. Help with long-term care costs

The likelihood of needing long-term care increases with age, and those services can be costly. Many life insurance policies, particularly permanent policies like whole or universal life, offer optional extra cost riders that allow the policyholder to access a portion of the death benefit to help pay for qualifying long-term care expenses. This approach may help protect other savings while still maintaining some level of benefit for heirs.

2. Access to funds for major expenses

Certain permanent life insurance policies allow you to accumulate cash value over time. You may be able to borrow against that cash value for large or unexpected expenses such as a medical need, wedding, or major purchase. If the loan is not repaid before death, the outstanding balance is typically deducted from the death benefit paid to beneficiaries.

3. Supplemental retirement income

Policies that build cash value may also be used as a source of supplemental income in retirement. While withdrawals or loans may reduce the death benefit, that tradeoff can align with changing priorities, especially once children are grown or major financial obligations decrease.

4. Tax-efficient transfers to heirs

Life insurance is commonly used as part of an estate strategy because death benefits paid to beneficiaries are generally not considered taxable income, under current tax law. This tax efficiency is used to make life insurance a useful tool for transferring wealth and helping to meet legacy goals.

5. Business succession planning

For business owners, life insurance has been used to support continuity and succession planning, particularly when used to fund buy-sell agreements. Co-owners may hold policies on one another so that, in the event of a death, the proceeds can be used to purchase the deceased owner’s share. This structure may help provide liquidity, stability and clarity during a difficult time.

How an advisor can help

A licensed advisor can help you evaluate how life insurance fits into your overall financial strategy, including managing risk and selecting policy features that align with your goals. If you do not currently work with an advisor, Regions can help connect you with one in your area.

Looking for professional guidance with estate planning?
Find an advisor in your area or get started on your journey via our wealth management guide.