A life insurance policy is an essential part of life planning, as it provides financial security for loved ones after you pass away. While this might not seem necessary if you have a will in place, this policy can be used in various ways, beyond the scope of traditional estate planning measures. Learn more about how this plan could benefit your loved ones below.

How to Use Your Life Insurance Policy

1. Cover Your Final Expenses

Life insurance is often used for final expenses, including funeral costs, medical bills not covered by health insurance, and estate costs. While a typical inheritance can also be used for these purposes, wills must go through probate, meaning your loved ones may not get the funds before these expenses are due. Having this money available right away helps reduce stress for your family and allows them to make final arrangements more easily.

2. Save for Retirement

Many life insurance policies let you accumulate cash value over time that you can use before you pass, which can help if you experience cost-of-living increases or need to save for retirement. If you need the funds right away, you can often withdraw directly from the insurance policy. Alternatively, you could take out a loan and use funds from your life insurance as collateral. In this case, if you fail to pay off the debt, your policy will simply deduct the amount of the loan.

3. Leave an Inheritance

If you want a specific person to inherit your policy's benefits, name them as the beneficiary. That way, they'll receive all the money when you pass away, without having to jump through any legal hurdles. You can even name a charity as a beneficiary if you want an organization to receive the benefits.

4. Pay Taxes

Most life insurance policies allow your beneficiaries to receive the benefits without paying taxes. However, there may be taxes associated with your other assets. For example, your heirs may have to pay capital gains taxes, income taxes, net investment income taxes, or estate taxes if your assets are from out-of-state. Life insurance benefits may be used to partially or entirely offset these expenses.

For help selecting the best insurance policies for your needs, contact the North Carolina Farm Bureau Insurance® Group in Matthews, NC. This company has a long history of customer satisfaction dating back to their founding in 1955. When you need to find the perfect coverage for yourself, your family, or your business, call them at (704) 841-8700. You can also learn more about their options on their website.