Life Insurance As a Gift
Life insurance protects you and your family from financial ruin if you die prematurely. However, many seniors and even parents also use life insurance as a way to give money to their children or to their favorite charity.
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Benefits
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A significant benefit of giving life insurance as a gift is that you can give money to your child, grandchild or favorite charity without using any (or very little) of your personal savings. Instead, money from your current income or interest on investments is used to pay for a life insurance policy, thus leveraging your savings to give life insurance as a gift rather than your own personal savings.
Types
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Three main types of insurance are used for gifting: whole life insurance, variable life insurance and universal life insurance. Whole life insurance offers guaranteed death benefits and guaranteed cash values. Variable and universal life insurance both offer flexibility in terms of death benefits and premium payments. With some universal life policies, and with all variable policies, both the cash value and the death benefit can be increased substantially over time by investment in mutual fund sub-accounts.
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Considerations
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Make sure to choose the right life insurance policy for you. Guaranteed death benefit options will ensure that your life insurance policy does not lapse and is received by your beneficiary. However, non-guaranteed death benefit policies will offer you the potential of higher than guaranteed death benefits allowing you to give more money than under a guaranteed policy.
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