So, you are reading this article, and that may mean that you understand the importance of life insurance and how it can payout a large lump sum in the event of someone's death. But wait, there's more.

Think of life insurance as a financial toolkit. It can do more than payout a lumpsum to your beneficiaries when you are gone.

These extra perks often not talked about, but they offer solid benefits you can use right now.

1. Living benefits are a financial safety net

One of the most compelling but underutilized features of life insurance is "living benefits." This rider allows policyholders to access a portion of their death benefit under certain conditions, such as terminal illness or the need for chronic care. Some insurers pay this as a monthly benefit, or a certain percentage of your life insurance policy. So, if you have a $500,000 life insurance policy, and you have a terminal illness or suffer a heart attack or stroke, you may be entitled to 10% to 50% of your policy.

This is called a living benefit because you are accessing your life insurance payout BEFORE you've passed away.

2. Provides a source of retirement income

Life insurance policies can also serve as a supplemental source of retirement income. Policies with a cash value component, such as whole life or universal life policy, have a portion of the policy that can grow over time. You have the option to borrow from this growth portion or cash it out directly.‍

This helps give you a little buffer for unexpected costs that may arise in retirement. Think of it as a cushion that can help seniors navigate the financial uncertainties of retirement, from healthcare costs to unforeseen expenses.

3. Creates estate planning and wealth transfer efficiency

In estate planning, life insurance shines as a tool for efficient wealth transfer. The death benefit from a life insurance policy is typically paid out tax free, offering a clear advantage over other inheritance methods. Plus, because these proceeds bypass probate, beneficiaries can access funds much more quickly.

4. Charitable Giving

For someone that has philanthropy close to their heart, life insurance presents an avenue for charitable giving with an impact. You can designate a charity as a percentage beneficiary of your life insurance policy that will be more significant through direct donations. Charity donations not only give you the ability to leave a legacy, help others in need, but it also softens the tax implications on your estate. Most Financial Advisors suggest a tax strategy as part of your estate planning.

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Closing

You can see that a good financial plan should include a life insurance policy. These 4 add-ons can help you with additional income in retirement, help efficiently transfer your wealth to your beneficiaries, and enabling substantial charity donations while softening the tax implications of your estate.

By taking advantage of these underrated benefits, you can maximize your financial well-being, ensure your peace of mind and feel confident that your loved ones are taken care of while helping your chosen causes.